BMW has confounded analysts by posting a better than expected second quarter operating profit thanks to cost cutting efforts aimed at limiting the effects of an 18% drop in vehicle deliveries.
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Second-quarter earnings before interest and taxes (EBIT) came in at EUR169m (US$243.2m), considerably more than most analysts expected. However, quarterly EBIT was nearly half last year’s EUR425m ($604.3m) because of falling sales, particularly in the luxury segment.
BMW’s car business recorded a EUR31m ($44m) loss before interest and taxes in the second quarter, compared with EBIT of EUR395m ($561.7m) in Q2 2008.
Chairman Norbert Reithofer said, despite some positive signals, a “lasting and wide-ranging recovery is not yet in sight”.
The company said it expected the downward trend in deliveries to stop in the second half but added it did not expect to reach the 1.4m vehicle unit sales it achieved in 2008.
Reithofer declined to give a forecast for 2009 and reiterated BMW aims to achieve automobiles EBIT margin of 8% to 10% by 2012.
The company said it cut the volume of leasing and financing contracts 19% during the first half as consumers were less able to afford deals, and were dumping their cars on the market and forcing BMW to make almost EUR2bn (US$2.8bn) in provisions last year for falling residual values.
BMW also cut its employee count 7% during the same period while Q2 inventory cuts helped generate free cash flow of EUR516m (US$733.7m) in the first half.
