COMPANIES BMW disappointed investors on Tuesday with a larger than expected drop in third-quarter earnings, providing a blow to hopes that the worst in the premium car market could be over.
The German group’s shares fell by more than 6 per cent after the world’s largest premium carmaker said its profit after tax had dropped 74 per cent to €78m ($114m) in the third quarter from €298m in the same period the year before.
In its core automotive business, the producer of BMW premium saloons, Mini small cars and Rolls-Royce luxury limousines reported a loss before tax of €154m after an €18m profit in the third quarter of 2008.
Norbert Reithofer, BMW’s chief executive, said the carmaker had suffered from an intense price pressure as the various scrapping incentives for small cars had triggered an incentive battle even in the premium segment.
He said BMW had distributed fewer cars to its dealers in an effort to improve their financial position and decrease pressure to give incentives.
BMW is still expecting a profit in the full year but Mr Reithofer said this goal depended on the overall economy and the automotive markets not to worsen by the end of the year.
The chief executive said it was too early for an all-clear signal for the world’s car markets.
“We expect markets to gradually recover in the course of next year,” he said.
Mr Reithofer said demand could remain volatile and the developed markets of North America, western Europe and Japan were expected to see low growth.
Arndt Ellinghorst, head of automotive research at Credit Suisse, said he was still upbeat for the carmaker.
“BMW is nothing for ‘quarter-junkies’. It is all about a sustainable recovery,” he said.
However, BMW’s results damped hopes that the premium car sector had returned on a straight and fast road to recovery.
Groups such as Audi, BMW and Daimler have suffered badly from the global economic crisis but have become more optimistic recently.
| Sales | Net profit | Earnings per share | Dividend |
|---|---|---|---|
| €11.8bn | €78m | €0.12 | n/a |
| ↓6% (yoy) | ↓74% | ↓73.3% | n/a |
Executives and analysts have said they have seen sales bottoming out in the premium car market amid a regained strength of financial markets and the global economy.
BMW’s rival Daimler last week delighted investors with an almost €1.5bn swing from loss into profit in its third-quarter earnings, thanks to an improving performance of its Mercedes car unit.
BMW will shortly go back to normal working hours at its German plants as the carmaker ramps up production for the launch of its X1 small sports utility and 5 series Gran Turismo models.
BMW’s sales dropped 7 per cent to 324,100 cars. The group’s earnings before interest and tax fell by almost 90 per cent to €55m. Revenues dropped by 7 per cent to €11.8bn.
