Tough trading conditions in Europe have put a dent in BMW’s first quarter revenues and profit.
First quarter BMW Group revenues totalled at EUR17.5bn, 4.1% off last year, while profit (EBIT) was EUR2,039m, down 4.5% on the same quarter last year. Group net profit came in at EUR1,312m, 3% off last year’s pace.
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BMW highlighted problems in Europe, but also noted that profit (on EBIT basis) was the second highest result ever achieved by the company in a first quarter as other regions helped compensate for weak demand in Europe. Strong sales in the US and China helped to support BMW’s performance in the first quarter. Sales volumes in the USA and China grew by 4.2% (to 79,117 units) and 7.5% (to 86,224 units) respectively.
“Despite the current weakness of car markets in Europe, the group has made a good start to the new financial year 2013. We achieved a new sales volume record for a first quarter. And despite high expenditure on new technologies and challenging market conditions worldwide, we managed to keep revenues and earnings at high levels,” said Norbert Reithofer, the BMW board chairman.
He also said that EBIT operating margin in the automotive division remains strong.
“At 9.9%, the operating margin in the Automotive segment for the three-month period was at the top end of the return corridor we aspire to achieve on a sustainable basis,” he said.
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By GlobalDataChristian Stadler, associate professor of strategic management at Warwick Business School in the UK said while BMW profits are falling, things are far from bleak for the company.
“Profits might not be as high as last year but they are still at a health. This is no small achievement when we consider how tough the European market is at the moment. Strong sales in the US and China in particular gives BMW confidence that annual performance will not suffer much.
“The car industry is suffering just as the European economy is suffering. There are firms bucking the trend like Jaguar Land Rover which are positioned well in the emerging markets and you see that those high end brands aimed at richer customers are not doing as badly. If you look at Germany, BMW is not doing as badly as Volkswagen. Car firms positioned in this way will be able to avoid the worst of the European slowdown.”
BMW was cautious on the outlook for the year, but said that it expected its full-year results to be in line with last year’s, despite continued high levels of investment and weak demand in Europe. Another record sales year is forecast.
“We do not expect to receive a great deal of impetus from most European markets over the next few months and economic conditions in these areas are likely to remain challenging”, Reithofer said.
For 2013, the BMW Group is still aiming to increase sales volume worldwide compared to the previous year. “We expect to achieve further sales volume growth in the current year, which will again result in a new all-time high,” said Reithofer.
BMW said it will continue to invest in expanding capacity in 2013 and that development costs for new technologies and vehicle concepts will also continue to rise. The company said that 2013 alone will see the launch of eleven new models. By the end of 2014, some 25 new models will have been added to the range, “10 of them totally new models”.
“Due to high levels of expenditure for new technologies and models as well as investment in the production network, we expect to report group profit before tax for 2013 on a similar scale to 2012”, Reithofer added.
