BMW Fourth-Quarter Profit Increases on Luxury-Car Sales

(Bloomberg) --

BMW AG finished 2019 with an increase in automotive profit on rising luxury-car sales as the German manufacturer faces a year mired in concerns over the coronavirus outbreak that threatens to shut down global supply chains.

• Automotive earnings before interest and taxes rose 26% in the fourth quarter to 1.83 billion euros ($2.03 billion). Sales in the period reached their highest on record for a single quarter because it sold a greater share of vehicles in the “upper luxury” segment, the Munich-based carmaker said Thursday.

Key Insights

• While BMW showed signs of recovery in the second half of last year, the first three months of 2020 have brought a fresh obstacle in the form of the coronavirus pandemic, which has roiled markets, shuttered factories and led to the cancellations of major business events. Car sales in China, BMW’s largest single market, effectively stopped in the first two weeks of February.
• BMW didn’t release an outlook for the year, saying it will update investors at its yearly news conference scheduled for March 18.
• BMW’s performance for the rest of the year will be dependent on how the Chinese car market recovers. Chief Financial Officer Nicolas Peter last month stuck to the company’s outlook for 5% to 10% sales growth in the region. The company is also betting on the continued strength of its high-end luxury models like the full-size X7 SUV and the 8-Series limousine.
• BMW is nearly a year into on an effort to cut more than 12 billion euros in costs by the end of 2022 to help fund an expansion into electric and self-driving cars. The company has already reduced the number of variants it offers for some models in order to slash production expenses.

Market Context

• The stock was down 11% at 45.24 euros as of 4:26 p.m. in Frankfurt amid a wider market slump.
• BMW shares have fallen about 39% since the start of the year, largely on fears over the impact of the coronavirus.

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• “We recognized the signs of change at an early stage and made preparations accordingly,” Chief Executive Officer Oliver Zipse said in a statement.
• The Ebit margin in the automotive business widened to 6.8% in the fourth quarter, from 6.3% a year earlier.
• Group sales increased 20% to 29.4 billion euros in the period, beating the analyst estimate of 26.5 billion euros.

To contact the reporter on this story: Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Stefan Nicola, Tom Lavell

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