BMW Q3 profit jumps on cost-cutting measures

  • Auto
  • Thursday, 07 Nov 2019

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MUNICH: BMW AG showed signs of recovery under its new chief executive officer, beating analyst estimates in the third quarter on aggressive cost-cutting and demand for upscale models like the big X7 SUV.

After stumbling in recent quarters with low profitability and a series of operational and regulatory issues, BMW reported a 33% jump in earnings before interest and taxes to 2.29 billion euros (US$2.54bil) in CEO Oliver Zipse’s first quarter in charge. The figure beat analyst expectations of 2.12 billion euros.

“The efficiency-boosting measures we have implemented are bearing fruit, ” chief financial officer Nicolas Peter said in a statement. “Nonetheless, we aspire to achieve more than that.”

The Munich-based manufacturer is pressing ahead with a cost-cutting programme aimed at saving more than 12 billion euros to help pay for electric vehicles and digital features like automated driving. The urgency was evident as research and development expenses climbed 9.4% to 4.25 billion euros in the first nine months of 2019.

BMW’s automotive profit margin widened to 6.6% from 4.4% a year ago, when it faced disruptions from regulatory bottlenecks that caused a widespread slump in European car sales. Still, the figure is below its target range of 8% to 10%.

BMW shares slipped 0.3% to 72.55 euros in Frankfurt trading, paring gains for the year to 2.7%.

To fund investment BMW has been relying on sales of high-end cars, including the new X7, and demand from China, where deliveries have surged 14.5% this year.

The push into battery-powered vehicles is picking up pace. The electric variant of the Mini will start production this month, followed by the BMW iX3 next year. The company is straining to meet tighter environmental regulations that start next year in Europe and would impose tough fines on carmakers whose average car emissions exceed 95 grams carbon-dioxide per kilometer.

Amid the tougher regulatory pressure and slowing demand in key markets, carmakers are looking to cut costs. Ford Motor Co cut its full-year forecast in October, while Volkswagen AG’s CFO Frank Witter last week warned the next two years will be tough.

“The vehicle of the future, with all its integrated digital functions, is a high-tech product of a complexity that is still underestimated, ” Zipse said in the statement. — Bloomberg

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