BMW’s net profit fell nearly 15% year over year to €1.45 billion in the third quarter, with the company citing weaker business in China. The German automaker also issued its second profit warning of the year, lowering its forecast for automotive operating margins and warning that the fourth quarter will be difficult.
BMW’s sales in China dropped by around a quarter amid a shrinking market, growing competition and intense price pressure. Gains in Europe and the United States helped offset some of the decline, leaving global vehicle deliveries down 6.3%. Revenue fell 5.8% to €30.5 billion.
The company now expects its automotive operating margin before financial results to be between minus 0.5% and plus 0.5% for the year, compared with its previous forecast of 1% to 3%. BMW said costs linked to its savings program, alongside other effects, are weighing on profitability and could leave the core business making a loss.
The cost-cutting program began in early October, but BMW closed it less than three weeks later after more employees than expected expressed interest in leaving in exchange for compensation. The company had previously estimated the program would cost more than €1 billion. Additional costs are expected as BMW phases out some older models earlier than planned.
BMW’s finance chief, Walter Mertl, described the measures as an investment in the company’s future margins, saying the company would intensify efforts to improve efficiency and streamline its structure. Chief executive Milan Nedeljkovic also said BMW would accelerate structural changes.
The automaker lowered its delivery outlook from a slight decline, defined as 1% to 4.9%, to a moderate decline of 5% to 9.9%. Its forecast for pre-tax profit remains unchanged, though BMW already expects that figure to fall by more than 15% following an earlier warning.
BMW’s third-quarter profit was slightly below Mercedes-Benz’s €1.52 billion. It was, however, well above the results reported by Audi and Volkswagen.
Sources: Handelsblatt.