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BMW earnings fall in Q2 on stronger euro, higher costs

02 Aug 2018, 17:29 ( 9 Months ago)

DF-Xinhua Report
File Photo Xinhua.

Revenue and profits fell at BMW during the second quarter (Q2) of 2018, earnings figures published on Thursday by the German luxury car maker showed.

   The Munich-based company cited currency headwinds from a stronger euro exchange rate as the main reason for a 3-percent annual fall in gross revenue to 25 billion euros (29.1 billion U.S. dollars). During the same period, currency-adjusted revenue increased slightly compared to the same period in 2017 as sales at the flagship BMW brand rose by 1.4 percent to 542,000 vehicles sold globally.

   Nevertheless, earnings before interest and taxes (EBIT) were down by 6 percent to 2.87 billion euros in Q2. Net profits were measured at 2.082 billion euros, marking an annual decline of 6.1 percent. Consequently, the closely-watched EBIT margin for the automotive division fell from 10.1 percent in Q2 2017 to 8.6 percent this year. As a result, BMW ranked behind rival luxury car maker Audi which achieved a Q2 EBIT margin of 9.2 percent.

   BMW blamed the fall in quarterly profitability on higher raw material costs and a rise in research and development (R&D) spending. The car maker plans to invest 7 billion euros in new technologies such as electric and autonomous vehicles in the course of the year, compared to 6.1 billion euros in 2017.

   In spite of weaker earnings in Q2, BMW re-affirmed its previous annual forecast. Speaking to press during a telephone conference on Wednesday, chief executive officer (CEO) Harald Krueger expressed confidence that the company would regain recent ground over its rival in the coming months.

   Compared with the Daimler and Volkswagen Group, BMW is already well-advanced in the process of adapting its fleet to new worldwide harmonized Light vehicles Test Procedure (WLTP). The new regulatory regime for exhaust systems testing will become legally-binding in the European Union (EU) as of September.

   "I see chances here," Krueger said with specific view to the second half of the year. Daimler and Volkswagen have both recently warned that their earnings and delivery windows for customers are likely to be disrupted by a protracted transition to the WLTP standard. Daimler has issued a profit warning in response to the regulatory changes while Volkswagen announced that there would be temporary downtime at its plants as a consequence.