Trump’s Trade War Claims Another Victim

June 28, 2018, 3:44 PM UTC

Osram Licht AG became the latest domino to fall in President Donald Trump’s trade war, with the German supplier of headlight components warning that barriers to car imports are weakening the outlook for the automotive industry.

“Restrictions on trade and sales, as well as planning risks affecting automotive manufacturers, have created noticeable uncertainty,” the Munich-based supplier of lighting equipment said in a statement Thursday. “Business performance will also be affected by the postponement of projects in the areas of mobile devices and horticulture.”

Osram cut its forecasts for sales growth and profit for the year, sending the shares down as much as 13 percent, the most in two months. The announcement is part of an almost-daily litany of companies warning of fallout from the trade dispute triggered by the U.S. president. German automaker Daimler AG last week became the first prominent company to cut its outlook because of the escalating trade tensions.

Damage So Far

June 20: Daimler cuts profit forecast on U.S. China trade fight

June 25: Harley says EU retaliatory tariffs will cost it $100 million a year
June 26: Jack Daniel’s maker Brown-Forman raises prices in light of the EU tariffs
June 28: Volvo Cars owner Li Shufu says consumers will pay more to buy cars as trade wars escalate

June 28: Osram says trade tensions have weakened sales of automotive lighting partsDaimler said Chinese customers will now buy fewer vehicles after Beijing slaps tariffs on U.S. auto imports in retaliation for U.S. levies. Osram already cut its forecast once in April, citing difficult market conditions and foreign exchange headwinds, and two months before that, it had guided for lower earnings this year.

‘Difficult to Understand’

“It is difficult for us to understand how the situation could have so fundamentally changed less than three months after the previous profit warning, which was already quite meaningful,” Morgan Stanley analyst Lucie Carrier said in a note. “We look for more transparency is in terms of what is going on in the business and how much control and visibility the company has on their earnings.”

Osram now is forecasting revenue growth of 1 percent to 3 percent instead of 3 percent to 5 percent previously. Adjusted earnings before interest, taxes, depreciation and amortization this year will be 570 million euros ($660 million) to 600 million euros, compared with a previous forecast of 640 million euros. It pledged to accelerate cost cutting and a reorganization of its factory alliance.

The shares fell 12 percent to 37.09 euros at 1:23 p.m. in Frankfurt, giving the company a market value of 3.9 billion euros.

Osram’s lower profit outlook also extended beyond the car industry: Zumtobel Group AG, an Austrian company that makes lighting systems for buildings, cited a deterioration in the U.K. market in its warning about lower earnings.

Osram is dealing with pressure from multiple fronts. About half its revenue comes from the automotive industry, and suppliers have also been squeezed by an ongoing scandal over diesel emissions.

Osram’s lighting business has also been struggling. The division that makes lighting fixtures might be sold, and a part of it — the U.S. service business — is in the the process of being sold for a low triple-digit million euro range. the company announced at its last quarterly earnings release in May.

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