BMW warns of profit slump

BMW AG warned earnings will fall “well below” last year’s level, and embarked on a €12bn ($14bn) efficiency drive to offset the impact of trade conflicts and unprecedented spending on electric cars.
The shares fell the most since September after the German luxury carmaker said yesterday that pretax profit is expected to decline by more than 10% this year.
BMW is responding by stepping up a savings program with plans to cull models, reduce development times by as much as one third and hold the workforce steady this year.
BMW’s weak outlook is a “troublesome” sign for the sector after the carmaker looked better-placed than competitors with a number of strong new models and the luxury-car market in China holding up, Bernstein analyst Max Warburtonwrote in a note. “This warning will inevitably increase worries about weaker names in the sector.”
BMW already flagged a challenging year ahead last week, saying great efforts will be necessary to push through the costly shift to electric and self-driving cars as markets fall and trade concerns mount.
The automotive profit margin will be in the range of 6% to 8% this year, below an 8% to 10% long-term target.
Chief financial officer Nicolas Peter added that guidance could fall even lower if conditions worsen. BMW 2019 forecast 2018 Pretax profit “well below” last year’s level, down at least 10% Pretax profit fell 7.9% to €9.82bn Automaking profit margin 6%-8%, long-term target remains 8%-10%
Automaking return on sales declined to 7.2% from 9%. “Our industry is witnessing rapid transformation,” Peter said. “A sustained high level of profitability is crucial if we are to continue driving change.”
BMW shares fell as much as 5.9%. The stock was down 4.6% to €72.26 as of 11:28am in Frankfurt.
BMW’s muted forecast also dragged lower the shares of luxury rival Daimler AG, which fell as much as 2.4%.