By Rachel More
BERLIN, Nov 4 (Reuters) – Premium automaker BMW reported an 11% drop in third-quarter pretax earnings on Wednesday, hours after warning that restructuring costs would hit results later this year and all but erase its core operating margin.
The German company issued its second profit warning in less than five months late on Tuesday, blaming fourth-quarter costs tied to a restructuring programme that includes 8,000 layoffs in its home market.
Third-quarter pretax earnings came in at €2.1 billion ($2.4 billion), in line with analysts’ expectations in a company-provided consensus.
The operating margin in BMW’s core automotive business narrowed to 3.4%, beating analysts’ forecast of 3.1%, but declining from 5.2% a year earlier.
BMW now forecasts a margin of between minus 0.5% and 0.5% this year. Excluding restructuring charges, the margin is seen above 2%, within its previous forecast range, it said.
The company said it planned to cut management functions more quickly under its restructuring drive.
“Current developments in our industry call for decisiveness and swift implementation. We will therefore specifically intensify and accelerate structural measures,” CEO Milan Nedeljkovic said.
Revenue fell 6% to €30.4 billion in the third quarter, hurt by declining sales in China, the world’s largest auto market, where Western automakers have struggled to keep pace with lower-cost domestic rivals.
BMW rival Mercedes-Benz also reported lower profits in the third quarter, while Porsche rebounded slightly but only after steep charges last year as it overhauls its model line-up and retreats from China.
BMW’s sales in China fell 22% in the first nine months of the year. The company said this was in line with a broader downturn in that market.
“China remains a key focus for us,” Nedeljkovic said. He also said the group’s Neue Klasse revival of its model offering begins in China this month with the launch of the iX3.
Under the CEO’s strategy to return margins to a long-term target of 8% to 10%, BMW plans to tailor its cars more to regional markets, including an expanded luxury SUV offering for the US and a new entry-level model for Europe.
In China, the automaker plans to localise development and supply chains, while using its production for export to Asia Pacific markets.
($1 = €0.8905)
(Reporting by by Rachel More. Editing by Thomas Seythal, Mark Potter and Tomasz Janowski)
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