BMW SHRUGGED off a weak European car market to post a drop in profit that was smaller than feared, showing the widening gulf between export-oriented premium car firms helped by Chinese and US demand and their ailing mass market peers.
Although results were roughly in line with consensus, investors promptly sold the stock, having hoped for a significant beat to consensus following last week’s positive surprise from chronic underperformer Daimler.
Group earnings before interest and tax (EBIT) at BMW fell 19 per cent from its record level last year to €2.27 billion in the second quarter.
But the decline was slightly less than the 23 per cent drop feared and largely mitigated by a €464 million gain from a release in risk provisions in the previous year’s quarter.
Quarterly operating profit was still its second-best ever.
The operating margin at its core auto business – a key profitability benchmark for the market – remained stable from the first quarter, at 11.6 per cent, as BMW weathered what it called “intense market competition”, usually a reference to rising incentive levels.
Chief executive Norbert Reithofer reaffirmed full-year targets that include an autos EBIT margin at the upper end of its 8-10 per cent range, but warned of the risk that short-sighted national politics could push the euro zone deeper into recession.
“There is no alternative to a collective Europe and a single currency. The euro has provided growth, employment and prosperity in this country and considerably strengthened Europe’s role as an economic power,” he said.
When asked whether he would be in favour of large scale sovereign bond purchases by the European Central Bank, the BMW ceo replied: “We believe that price stability should remain the paramount goal of monetary policy. Nevertheless there is a very clear plea from my side for the preservation of the euro zone.”
BMW’s exports to markets like China and the US do not just make it more immune to the troubles in Europe – for now it is actually reaping dividends from them, since the crisis has caused the euro to drop to nine-year lows versus a basket of major currencies.
- (Reuters)