By: Fabian Cotter

DAIMLER AG has issued a statement that earnings potential for 2018 is expected to be “slightly below the previous year's level”, with a decline in demand for Daimler buses in Latin America and its vans affected by the ‘diesel recall’ contributing factors, it’s reported.

Less bus demand in Latin America and diesel recalls of vans have affected Daimler's earnings expectations.

The massive German automotive entity says that due to current developments worldwide, it has had to make this new assessment of the earnings potential for this year with reasons affecting business aspects across the board.

It states: "From today's perspective, the decisive factor is that, at Mercedes-Benz Cars, fewer than expected SUV sales and higher than expected costs - not completely passed on to the customers - must be assumed because of increased import tariffs for US vehicles into the Chinese market. This effect cannot be fully compensated by the reallocation of vehicles to other markets."

"As another decisive factor, a negative effect on earnings is to be expected in the second half of the year in connection with the new certification process WLTP (Worldwide Harmonized Light Vehicles Test Procedure).

"Furthermore, earnings at Mercedes-Benz Vans are affected in connection with the recall of diesel vehicles.

"Additionally, earnings at Daimler Buses are negatively affected by the declining demand in Latin America."

As a result, Daimler now has the following expectations for EBIT in the year 2018:

"Mercedes-Benz Vans: significantly below the previous year's level,

"Daimler Buses: in the magnitude of the previous year,

"Mercedes-Benz Cars: slightly below the previous year,

"Daimler Group: slightly below the previous year's level."

 "The operating result EBIT represents earnings before interest and taxes."

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As explained by, EBIT and EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortisation - are often used by investors when valuing a company. Simply stated, EBIT shows a firm's operating earnings before interest and taxes but after depreciation. EBITDA calculates earnings before any depreciation or amortisation is determined.

 "EBITDA is popular among highly leveraged and capital-intensive firms that require lots of depreciation calculations, such as utilities or telecommunications companies. This is because these firms have high depreciation rates and large interest payments on debt, often leaving them with negative earnings. In turn, negative earnings figures makes valuation tricky, so analysts instead rely on EBITDA to show the earnings actually available for debt payments. This manifests itself by showing up higher on the income statement, creating positive numbers in common valuation models," it explained.


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