MUNICH: BMW AG lowered its profit outlook for the year as the German carmaker said the fallout from the coronavirus pandemic, which continues to disrupt production and sales in markets from Europe to North America, is lasting longer than expected.
BMW now sees an earnings before interest and taxes margin for the automotive segment of between 0% and 3%, from 2% to 4% earlier, the company said late Tuesday.
The new outlook is a sign that BMW is bracing for tough times after carmakers from Ford Motor Co. to Daimler AG forecast falling profit in the past days because of the pandemic.
The crisis is hitting BMW and its peers at a sensitive time - manufacturers are ramping up spending on electric vehicles to meet tougher emissions regulations and need profits from conventional cars to fund those investments.
Zipse.
“The situation remains serious,” chief executive officer Oliver Zipse said. “We are keeping a tight rein on inventory levels because liquidity has absolute priority in this situation.”
BMW is the last European carmaker to report, and on Wednesday provided more detailed earnings figures. Group sales and operating profit climbed in the first quarter because of several negative one-time effects in the previous-year period. BMW’s automotive sales, a key metric watched closely by analysts, fell 6.4% amid showroom closures in March.
Car sales won’t return to normal in the coming weeks and the second quarter will be worse than the first three months of the year, BMW said.
Both Fiat Chrysler Automobiles NV and Volkswagen AG expect to lose money in the period from April through June. In the US, General Motors Co. is expected to release earnings later today.
While the first quarter looks “fairly good,” the current period will mark the trough, said Bankhaus Metzler analyst Juergen Pieper. “A loss is very likely, revenues could be down as much as 25-30%,” he said by email.
The carmaker still expects group profit before tax to be “significantly lower” than in 2019, after Chancellor Angela Merkel this week dashed the company’s hopes for immediate auto purchasing subsidies, with the German government deferring a decision until June.
BMW is also slashing investments this year, to less than 4 billion euros from 5.7 billion euros previously, chief financial officer Nicolas Peter said today.
The carmaker’s new guidance doesn’t reflect a longer recession in major markets, a more severe slowdown in China, tougher competition because of the virus and “possible implications caused by a second wave of infections and associated containment measures,” BMW said.
