Bloomberg News

BMW Sticks to 2013 Target After Earnings Exceed Estimates

May 02, 2013

BMW First-Quarter Profit Drops as European Plunge Hits Pricing

A BMW 7 series automobile, produced by Bayerische Motoren Werke AG, is displayed on the company's stand ahead of the opening day of the 83rd Geneva International Motor Show in Geneva. Photographer: Chris Ratcliffe/Bloomberg

Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury cars, reported first-quarter profit that beat analyst predictions and kept its 2013 forecast as sales of new 3-Series models helped offset investment costs.

BMW headed to a seven-week high in Frankfurt trading after saying first-quarter earnings before interest and taxes totaled 2.04 billion euros ($2.69 billion). Profit exceeded the 1.82 billion-euro average of 12 analyst estimates compiled by Bloomberg. Pretax profit this year will match 2012’s figure, the Munich-based company said.

The maker of BMW, Mini and Rolls-Royce vehicles expects new models and rising demand in China and the U.S. to shield it from the effect of the sovereign-debt crisis on Europe’s car market, which is sliding to a 20-year low. Backed by introductions of the 4-Series coupe and 3-Series GT, the automaker is targeting record deliveries this year, while spending to maintain its lead over Volkswagen AG (VOW) (VOW3)’s Audi and Daimler AG (DAI) (DAI)’s Mercedes-Benz erodes profit growth.

Earnings will hold steady this year as a decline in profit at the automaking business stemming from development costs and product-pricing pressure, is offset by gains at the financial- service division, Chief Financial Officer Friedrich Eichiner said on a conference call with journalists.

BMW rose as much as 3.1 percent to 72.20 euros and was up 1.5 percent at 71.08 euros at 12:37 p.m., the highest price on a closing basis since March 13. That pared the stock’s decline this year to 2.6 percent, valuing BMW at 45.6 billion euros.

Margins Decline

First-quarter automotive-unit Ebit narrowed to 9.9 percent of revenue from a 11.6 percent margin a year earlier. That compares to a 11.1 percent margin at Audi in the period. Profitability at Mercedes dropped to 3.3 percent of sales from 8.2 percent a year earlier. BMW reiterated today that Ebit at the auto division this year will be in a range of 8 percent to 10 percent of sales.

“The auto Ebit margin was an impressive performance,” said Frank Biller, a Stuttgart, Germany-based analyst at LBBW. “It now depends on the second quarter and the expected improvements in the second half of the year if they can reach the upper end of the margin range.”

Net income slipped 3 percent to 1.31 billion euros, as revenue declined 4.1 percent to 17.5 billion euros, BMW said. The carmaker doesn’t expect major effects on profit from currency shifts this year, CFO Eichiner said.

New Cars

BMW will roll out 25 new models by the end of next year, with 10 of them having no predecessor, in a bid to keep rivals at bay. Mercedes is bringing out 13 all-new models by the end of the decade. Audi (VOW3) plans to double its lineup of sport-utility vehicles to six by 2020, a person familiar with the matter said in February.

BMW is targeting a third consecutive year of record deliveries in 2013 as it introduces variants of the best-selling 3-Series line-up, such as the coupe-like GT, and prepares by the end of the year to roll out its first electric vehicle, the i3 city car.

“Doubts remain that they can hold up profits and the auto margin this year, because a lot of their important products are maturing and growth in China has slowed,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “BMW is spending a lot on the marketing of its i3 electric car as they want to secure a successful start at any price.”

European Pricing

The company is anticipating that the new models will offset slumping demand in Europe, where Eichiner said a car market recovery in the second half of the year is “unlikely.” Competition in Europe lowered the vehicle-price levels in the first quarter by more than the 0.5 percent to 1 percent anticipated for the full year, the CFO said.

BMW expects difficult conditions in Europe to prevail another five years, Chief Executive Officer Norbert Reithofer said on the call.

The BMW brand increased first-quarter deliveries 7 percent to 381,404 cars and SUVs, maintaining an 11,904-vehicle lead in global sales over Audi, on higher demand for the 6-Series coupe, X1 SUV and 3-Series sedan and wagon, which was overhauled last year. Mercedes (DAI) trailed in third place, with sales rising 3.5 percent to 324,898.

BMW’s global vehicle sales probably rose at a mid-single digit percentage rate in April, said CEO Reithofer. U.S. sales by the brand jumped 10 percent last month, the company said yesterday.

The carmaker spent 988 million euros on research and development in the first quarter, a 2 percent increase from a year earlier, CFO Eichiner said. Investments also include developing alternative drivetrains to lower fuel consumption and emissions.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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