Arab Today, arab today bmw pricing trends weighing on margins
Last Updated : GMT 10:23:50
Arab Today, arab today
Arab Today, arab today

BMW: Pricing trends weighing on margins

Arab Today, arab today

Arab Today, arab today BMW: Pricing trends weighing on margins

Berlin - Arabstoday

BMW’s operating profits from its core car business fell more than expected in the first quarter, weighed on by discounting in some European markets and technology costs. Earnings before interest and tax (EBIT) plunged 15.9 percent to 1.58 billion euros ($ 2.1 billion), BMW said, short of the average forecast given by analysts of 1.6 billion euros, while the operating margin dropped to 9.9 percent from 11.6 percent as car sales slipped 1.6 percent to 15.91 billion euros. “The business environment we’re operating in is becoming ever more uncertain and volatile,” Chief Executive Norbert Reithofer said, ruling out a recovery in the short term in European demand. However, the Munich-based company reaffirmed its aim of pushing total vehicle sales this year to a new record. It also still aims to match last year’s record group pretax profit and achieve an operating margin of between 8 and 10 percent in automotive operations. German luxury brands such as BMW, Volkswagen’s Audi and Mercedes have fared better in the economic downturn than their European mass-market rivals such as Peugeot. BMW said net prices for its cars in the first three months of the year fell by more than the 0.5 to 1.0 percentage points projected for 2013, as manufacturers in Europe battle the slump with ever deeper discounts. “Pricing trends are of course not positive and, to an extent, are weighing on margins,” Finance Chief Friedrich Eichiner said, without being more specific. BMW is ramping up its spending on research and development of fuel-efficient technologies as well as new models such as the Megacity electric car, dubbed the i3. Related costs should subside after 2014, the CFO said. Meanwhile car sales in China may rise by a high single-digit or low double-digit percentage rate this year, BMW reaffirmed, compared with the company’s 40 percent growth in 2012. First-quarter sales growth in China was held back by declining imports of vehicles such as the flagship 7-Series and X5 and X6 sport-utility vehicles from Germany and the United States, Bernstein analyst Max Warburton said in a note. In comparison Audi posted a smaller drop in its quarterly operating margin to 11.1 percent from 11.4 percent. Audi, luxury-market leader in China and Europe, is also targeting a range of 8 to 10 percent for 2013. Mercedes has fallen further behind its German rivals, struggling to match BMW and Audi’s scale and efficiency in smaller cars as well as their success in China. The brand’s first-quarter margin plunged to 3.3 percent from 8.2 percent. Parent Daimler abandoned its earnings forecast for a second time in six months on April 24 after its quarterly profit plunged by more than 50 percent due to the market malaise in Europe and Chinese distribution problems. “While we continue to rate BMW as ‘outperform’ and see it as the best of the Germans in 2013, it is hard to see the market getting newly enthused,” Warburton said. BMW’s shares were up 1.2 percent at 70.92 euros at 1101 GMT, when shares in VW were down 1.3 percent at 151.85 euros and Daimler was off 0.5 percent at 41.805 euros. Source: ArabNews

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Arab Today, arab today bmw pricing trends weighing on margins Arab Today, arab today bmw pricing trends weighing on margins

 



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