BMW drops in third quarter on currency issues and electric-car development

Frankfurt — German car maker BMW, on Wednesday, reported a 27% drop in third-quarter operating profit to €1.75bn, missing analyst expectations amid currency headwinds and higher research and development expenses.

Analysts in a Reuters poll had, on average, expected earnings before interest and taxes (ebit) to come to €1.795bn. BMW shares fell 2.6% in early Frankfurt trade.

BMW said that despite a slight rise in deliveries of luxury cars, its operating return on sales for the automotive division narrowed to 4.4% from 8.6% a year earlier, well below its targeted range of 8% to 10%.

Earnings were hit by higher raw material prices, currency effects, higher provisions for goodwill and warranty measures, tariffs between China and the US, and a price war in Europe, the company said.

BMW made provisions of €679m for vehicle recalls in the third quarter.

To secure enough raw materials for batteries, BMW said it will purchase specific raw materials, such as cobalt, then make them available to battery-cell suppliers. BMW is establishing a technology consortium with Swedish battery manufacturer Northvolt and Belgium's Umicore to develop a value chain for battery cells in Europe, including development, production and, ultimately, recycling.

Last month, BMW warned that its pre-tax profit would fall this year against earlier expectations for a flat outcome, and cut its profit-margin guidance for cars, blaming intense price competition.

“Compared with 2017, additional upfront expenditure of about €1bn for the mobility of the future, and a high three-digit million euro negative impact from exchange-rate and raw-materials price developments, had been factored into expected earnings for the year,” BMW said.

BMW had fewer problems than rivals Volkswagen (VW) and Daimler in terms of selling cars that conform to the new worldwide harmonised light-vehicle test standard (WLTP), but the introduction of the rules has led to supply distortions and heavy discounting in some markets.

Reuters