BMW Predicts Tough Fourth Quarter After Profits Slump - EcoFinBiz Blog

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BMW Predicts Tough Fourth Quarter After Profits Slump

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(Bloomberg) -- BMW AG said it expects a difficult end to the year after trade tensions, higher provisions and pricing pressure during the third quarter nearly halved automotive profits

Key Insights

  • Unlike the fourth-quarter recovery forecast by Volkswagen AG and Daimler AG, BMW said the drag will continue to “have a significant effect” on results during the period.
  • Manufacturers are “increasingly confronted with adverse external factors, the negative impact of which cannot be fully offset,” said Chief Financial Officer Nicolas Peter. Returns from automaking nearly halved to 4.4 percent of sales during the third quarter.
  • BMW is dealing with challenges on multiple fronts. New emissions tests in Europe that took effect in September led competitors to flood the market, undermining prices. The tough environment was a key reason for BMW to lower profit targets in September.
  • Recalls to fix fire-prone vehicles and other warranty claims forced BMW to set aside more funds. A global campaign to exchange certain engine modules contributed to a boost in provisions by 679 million euros ($777 million).

Market Reaction

  • BMW fell 2.2 percent in early trading on Frankfurt’s Tradegate.
  • Carmaker shares have buckled this year. BMW has declined 11 percent while Daimler has lost more than a quarter of its value.

Get More

  • BMW Third Quarter Ebit Misses Estimates
  • The company is hosting a media call at 10 a.m. and an analyst webcast at 2 p.m. local time. Investors will expect updates for the fourth quarter, and some early indications for 2019, as well as more on possible measures to address the tariff drag from U.S.-China shipments.
  • BMW ships SUVs from the U.S. to China that get lumped with a 40 percent tariff (compared with a 15 percent levy from elsewhere). The punitive measure costs BMW some 200 million to 300 million euros in profits, according to Bankhaus Lampe.

To contact the reporter on this story: Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, ;Anthony Palazzo at apalazzo@bloomberg.net, Elisabeth Behrmann

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