ACTIONS CORNER
Daimler AG: Second Profit Warning in 2019
Following a profit warning in June, Daimler informed about a Group EBIT for the second quarter significantly below market expectations and made another adjustment to the earnings outlook on July 12th. According to this statement, the Group EBIT for the quarter amounted to minus 1.6 Billion Euro (Q2 2018: 2.6 billion Euro).
In addition to the facts already disclosed in the June release and adjustments to sales and earnings projections due to slower product ramp-ups and lower growth in automotive markets than expected, the following items have been identified as new major problem topics:
- New information leads to a revised risk assessment regarding provisions for an extended recall in connection with Takata airbags. Provisions had to be increased by around 1.0 billion Euro.
- The EBIT was further impacted by a reassessment in connection with ongoing governmental and court proceedings and measures relating to Mercedes-Benz Diesel vehicles, which leads to an increase in expected expenses by around 1.6 billion Euro.
- A decision by the Board of Management in the context of the product portfolio review and prioritization affected the earnings of the Mercedes-Benz Vans division by around 0.5 billion Euro.
Deutsche Bank AG: Strategic Transformation and Restructuring Initiated
In light of the ongoing operational underperformance, Deutsche Bank´s Management Board announced a series of measures to restructure the bank´s operations with the aim to improve long-term profitability and returns to shareholders.
Deutsche Bank will exit its Equities Sales & Trading business while retaining a focused equity capital markets operation. Also, the Fixed Income operations will be resized and the wind-down of the non-strategic portfolio shall be accelerated. In total, the bank expects to reduce risk-weighted assets allocated to these businesses by approximately 40%. These actions are designed to allow the bank to focus on and invests in its core businesses, which are Corporate Banking, Financing, Foreign Exchange, Origination & Advisory, Private Banking, and Asset Management.
Furthermore, a significant restructuring of businesses and infrastructure is planned, including a cost reduction program designed to reduce adjusted costs to 17 billion Euro in 2022 and targeting a cost-income ratio of 70% in that year.
Deutsche Bank expects to take approximately 3 billion Euro of aggregate charges in the second quarter 2019 to facilitate the restructuring, including a deferred tax asset write-down of approximately 2 billion Euro and impairments of approximately 0.9 billion Euro. Additional restructuring charges are expected in the second half of 2019, and subsequent years. In aggregate, the bank expects cumulative charges of 7.4 billion by the end of 2022.
Deutsche Lufthansa AG: 340 Million Euro extra for the Taxman
Lufthansa AG made a profit warning and adjusted its full-year outlook. The operating business is suffering from a deterioration in European markets, caused by market-wide overcapacities and aggressively growing low-cost competitors putting pressure on yields. Based on the expectation of low single-digit Group revenue growth, the Group´s adjusted EBIT margin is now forecasted to reach 5.5 to 6.5 percent, resulting in a Group adjusted EBIT amounting to between 2.0 and 2.4 billion Euro in 2019.
However, Lufthansa also announced that the company will make a provision for a tax risk in the amount of 340 million Euro due to a change in the case law established in prior years by the German Supreme Tax Court.
METRO AG: Substantial Impairment on the Hypermarket Business
METRO AG has concluded an agreement on exclusive negotiations regarding the sale of its hypermarket business and related business activities (“Real”) with a consortium led by redos. The agreement provides that Real shall be sold to redos, but METRO shall initially retain a 24.9 percent holding in the operative business of Real and has a put option that shall be exercisable at the earliest after three years. Based on the status of the negotiations in May 2019, METRO decided to impair the value of the hypermarket business in the amount of 385 million Euro in its interim accounts for the first half of 2019.
Following an in-depth due diligence, the signing of a sale agreement is expected later in 2019.