What were described as “the effects from the international financial crisis” resulting in “exceptional expenses” in the first quarter saw BMW’s net profit fall 17.0% to EUR487m.
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Pre-tax profit fell 24.8% to EUR641m.
The company said “exceptional expenses” of EUR236m “cast a shadow over the strong first-quarter operating performance” but group revenues nonetheless rose 11.2% to EUR13,285m.
“Adjusted for the exceptional gain on the settlement of the exchangeable bond on shares in Rolls Royce in 2007, we are still aiming to post higher pre-tax earnings than last year,” said BMW chairman Norbert Reithofer.
The automaker said Q1 earnings were adversely affected by the weaker US economy in particular.
“The international financial crisis worsened and the climate for consumer spending became gloomier. As a consequence, [used] car prices – and hence the level of revenues that can be generated on vehicles at the end of lease contracts – fell,” BMW said.
It added it had made some provision for this previously but the situation worsened during the quarter, particularly in March, necessitating additional measures.
“Unfavourable developments on the used car market in the USA during the first three months of 2008, including the expense for an additional risk provision recognised in the automobile segment, had a total negative impact of EUR157m on first-quarter earnings,” it added.
“The BMW group considers that the risk provision recognised in the first quarter will be sufficient for the remainder of the year.”
Expenses of approximately EUR40m were also booked for the planned reduction of the workforce.
See also: FEATURE: BMW’s calm before the ‘double cone cyclone’
