STUTTGART, Germany — Daimler reported a 64 percent fall in 2019 net profit, its largest drop in a decade, despite record-high Mercedes-Benz sales as CEO Ola Kaellenius signed off on more than 5 billion euros ($5.46 billion) in legal and restructuring charges.
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Shares in the German automaker rose 2 percent before falling into negative territory after the earnings, which had been flagged in preliminary figures on Jan. 22.
Mercedes retained its title as the world's top-selling premium automaker but net profit fell to 2.7 billion euros from 7.6 billion reflecting 4.2 billion euros in charges related to diesel probes and legal proceedings.
Mercedes scrapped its X-Class pick-up truck and restructured its mobility services unit last year, meaning further charges of 828 million and 405 million euros, respectively.
GETTING BACK ON TRACK
Kaellenius said restructuring at the vans division would deliver results this year but cautioned Daimler's passenger car operations face a tough couple of years.
"We are going to restore the financial health of this company and take the measures we have to take to get back on track,'' Kaellenius said. "Yes, it will take some time on some of the issues. There are no quick fixes.''
The 50-year-old Swede, formerly the company's research and development chief, took over as CEO last May. He said the carmaker was working on next-generation models that will be less complex to produce from 2025 onwards.
Kaellenius is tasked with safeguarding Daimler's success as the industry undergoes sweeping changes including tougher environmental rules and a costly shift to electric power.
That challenge is seen in Daimler's share performance: its stock is down 12% year to date versus an 84% rise in electric car producer Tesla, Refinitiv Eikon data shows.
"There is very little scope for optimism at Daimler. It will take years until margins recover to levels worthy of a premium manufacturer,'' said Michael Muders, fund manager at Union Investment.
Mercedes-Benz is readying a major push into electric and hybrid cars, with the proportion of electrified vehicles in its fleet set to jump to 9 percent from 2 percent in 2020 with the production this year of an electric A-Class, electric van and electric SUV.
Mercedes-Benz is also working on developing its own software vehicle operating system.
The company said it aims to keep property, plants and equipment and R&D spending at roughly the same level as last year.
It will look for savings of more than 1.4 billion euros by the end of 2022 through cuts in administrative and personnel costs and expects a significant rise in operating profit and free cash flow this year.
"Our goal is to ensure solid net liquidity to protect the necessary investments, and at the same time to pay attractive dividends,'' Chief Financial Officer Harald Wilhelm said.
Alongside taking hefty charges to end 2019, the company slashed its dividend by 72 percent to 0.90 euros per share.
($1 = 0.9164 euros)
(Reporting by Edward Taylor and Ilona Wissenbach; editing by Michelle Martin and Jason Neely)