BMW reports better profits than forecast
By Christiaan Hetzner |
May 6, 2010, Thursday
|
Print Edition
Print Edition
BMW, the world's largest premium car maker, swung to a stronger-than-expected operating profit in its core automobiles segment after demand rebounded from an extremely weak year-ago period.
BMW said yesterday that the segment's first-quarter earnings before interest and tax (EBIT) amounted to 291 million euros (US$388 million).
BMW's quarterly EBIT margin at automobiles came in at a surprisingly high 2.7 percent as a result.
Analysts had expected a well-flagged inventory clear-out of old BMW 5 Series models ahead of a March relaunch would boost incentives during the first quarter, with the inevitable deterioration in pricing and profitability.
"We are aiming to achieve significantly higher group earnings in 2010 than in 2009, thus making a tangible step towards achieving the targets we have set for 2012," said Chief Executive Norbert Reithofer.
Group pretax profit last year was 413 million euros.
Arch rivals Audi and Mercedes also reported substantially better profit margins, earning returns of 5.8 percent and 7.0 percent.
BMW has forecast the automobile segment would earn an operating return on sales in the low single digit percentage range this year, while maintaining roughly the 1.46 billion euros in free cash flow it generated in 2009 once adjusted for one-off spending such as moving pension liabilities off its balance sheet.
Optimistic
The group aims to lift its EBIT margin in automobiles to 8-10 percent in 2012, which many analysts consider overly optimistic since the goal was set towards the end of 2007 amid the peak of the credit-inflated boom.
Vigorous cost cutting means BMW's fixed cost base is lower than that of 2005, giving it confidence it can achieve profitability targets despite likely selling 200,000 fewer units than planned.
BMW argues it is better suited than rivals to benefit from the upturn since the bulk of its high-margin model lines is being relaunched.
BMW said yesterday that the segment's first-quarter earnings before interest and tax (EBIT) amounted to 291 million euros (US$388 million).
BMW's quarterly EBIT margin at automobiles came in at a surprisingly high 2.7 percent as a result.
Analysts had expected a well-flagged inventory clear-out of old BMW 5 Series models ahead of a March relaunch would boost incentives during the first quarter, with the inevitable deterioration in pricing and profitability.
"We are aiming to achieve significantly higher group earnings in 2010 than in 2009, thus making a tangible step towards achieving the targets we have set for 2012," said Chief Executive Norbert Reithofer.
Group pretax profit last year was 413 million euros.
Arch rivals Audi and Mercedes also reported substantially better profit margins, earning returns of 5.8 percent and 7.0 percent.
BMW has forecast the automobile segment would earn an operating return on sales in the low single digit percentage range this year, while maintaining roughly the 1.46 billion euros in free cash flow it generated in 2009 once adjusted for one-off spending such as moving pension liabilities off its balance sheet.
Optimistic
The group aims to lift its EBIT margin in automobiles to 8-10 percent in 2012, which many analysts consider overly optimistic since the goal was set towards the end of 2007 amid the peak of the credit-inflated boom.
Vigorous cost cutting means BMW's fixed cost base is lower than that of 2005, giving it confidence it can achieve profitability targets despite likely selling 200,000 fewer units than planned.
BMW argues it is better suited than rivals to benefit from the upturn since the bulk of its high-margin model lines is being relaunched.
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