BMW's quarterly earnings took a hit as auto sales in China have slowed.
BMW AG, which had enjoyed rapid growth in China in recent years, demonstrated the potential down side of its Chinese partnerships as earnings dropped during the April to June quarter as the Chinese automotive market began to weaken.
“There have been increasing signs of more moderate growth in the Chinese auto market for several months now,” noted Friedrich Eichiner, BMW’s finance chief.
“The market is normalizing faster than originally forecast. The second quarter saw increased competition across the industry – while the volatility of the Chinese stock market has also weakened consumer confidence,” he said.
In recent years, BMW has benefitted from China’s high double-digit growth rates. In 2014, the unit’s sales of 456,000 vehicles were almost 20 times what they had been a decade ago, he added.
The German luxury carmaker’s pre-tax profit was affected by lower earnings generated at the level of the joint venture BMW Brilliance Automotive Ltd., Shenyang, and by fair value losses arising on the measurement of derivatives.
Earnings before interest and taxes (EBIT) for the period from April to June amounted to 1.8 billion euros, a 16% decline from the same period a year ago, resulting in an EBIT margin of 8.4%, which was within the target range of 8 to 10%, but well below the 11.7% margin of a year ago.
BMW’s six-month EBIT declined 3.4% amounted to 3.6 billion euros with the EBIT margin finishing at 8.9%, compared to 10.7% for the first half of 2014. Profit before tax of the Automotive segment for both the second quarter of 2015 was 1.8 billion euros, a drop of 18% for the same period in 2014.
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Profit before taxes for the first and the six-months of 2015 was down 10.7% from a year earlier, according to the company’s quarterly financial statement, at 3.5 billion euros, compared to 3.9 billion euros in 2014. In both periods, EBIT was influenced by a model mix changeover, fierce competition and higher personnel expenses, the company said.
The picture was brighter, however, on the revenue side. For the period from April to June, segment revenues rose 17% to 21.7 billion euros, while six-month revenues grew by 15.6% to 40.5 billion euros. In both cases, the figures benefited from favorable volume and currency factors. Adjusted for exchange rate factors, the increases for the second quarter and the six-month period were 5.8% and 5.7%, respectively, BMW reported.
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Eichiner said the 7.5% increase in volumes confirms that the BMW Group has attractive models on the market. It shows the strength of our premium brands and our product line-up. It also affirms our strategy of globally balanced sales growth.
BMW Motorrad delivered more than 47,000 motorcycles from April to June – its highest-ever quarterly figures. The market development seen in the first three months continued. We once again reported solid sales growth in the Americas and Europe.
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“Competition is increasing in the U.S. The strong dollar is creating attractive market conditions. OEMs are allocating units from China and other emerging markets to benefit from the currency effect,” Eichiner said.