BMW Earnings Bounce Back but Industry Woes Remain
06 November 2019 - 12:38PM
Dow Jones News
By William Boston
BERLIN -- BMW AG returned to profit in the third quarter, helped
by cost-cutting and a sales shift to higher-margin sport-utility
vehicles, but it warned that Germany's luxury car industry would
continue to be squeezed by growing costs and heightened
competition.
The manufacturer of BMW, Mini and Rolls-Royce automobiles
undertook a large cost-cutting program earlier this year after its
profit margin was eroded by slowing sales and the costs of shifting
toward electric cars and new self-driving technology.
On Wednesday BMW said its efforts to boost earnings were bearing
fruit and could see it achieve annual savings of EUR12 billion by
the end of 2022.
"We are performing at a high level in comparison with our
competitors and considering the difficult conditions our business
is facing," said Nicolas Peter, BMW's finance chief, in a
statement." Nonetheless, we aspire to achieve more than that."
BMW said the rise in profit was on the back of strong SUV sales.
Net profit in the third-quarter rose to EUR1.52 billion ($1.69
billion) from EUR1.36 billion a year earlier, and its closely
watched pretax profit margin in its core automotive business
rebounded to 6.6% of sales from 4.4% a year ago.
Revenue in the third-quarter rose nearly 8% to EUR26.7 billion
on the back of strong sales in China, where major car makers have
struggled due to the slowing economy. New car sales rose 3.6% on
the back of higher X3 and X4 SUV sales.
BMW's quarterly earnings were largely in line with analyst
forecasts, who noted that the company had already abandoned its
outlook for a strong rebound in profit in the second half of the
year, and now expect it to hit the low end of its 6% to 8% target
for automotive profit margins and lower its annual dividend.
"The third quarter shows that BMW is back to normal, but it is
not very inspiring," said Philippe Houchois, an automotive analyst
at brokerage Jeffries. "It's a well-run business, but it's a brand
that to some extent needs to be reinvented and we're not seeing
that yet."
Daimler AG and Audi AG, BMW's rivals in the high-end premium car
market, are also facing similar challenges. Daimler is expected
next week to unveil a cost-cutting plan to stem the erosion of its
profits, while Audi, the luxury unit of Volkswagen AG, is
struggling with severe overcapacity at its main plants in
Germany.
BMW is at the center of a European antitrust investigation
alleging that German auto makers colluded to limit competition in
emissions systems equipment, which forced the company to take a
EUR1.4 billion ($1.6 billion) charge against earnings earlier this
year to cover for potential fines and legal fees. BMW said it would
contest the European Union's allegations with all legal means at
its disposal.
Mr. Peter said the company would stick to its targets for the
full year, which had already been adjusted to lower
expectations.
In the first nine months of the year, BMW said net income fell
37% to EUR3.6 billion, and revenue rose 3.4% to EUR74.8 billion as
sales rose 1.7% to 1.87 million vehicles.
--Max Bernhard contributed to this article.
(END) Dow Jones Newswires
November 06, 2019 06:23 ET (11:23 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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