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BMW car margins fall to lowest in almost five years
March 12, 2015 / 11:48 AM / 3 years ago

BMW car margins fall to lowest in almost five years

ZURICH (Reuters) - Profitability at BMW’s (BMWG.DE) car division fell to its lowest in nearly five years in the last three months of 2014, preliminary results showed on Thursday, sending the carmaker’s shares down more than two percent.

A BMW 220i Gran Tourer is seen during the first press day ahead of the 85th International Motor Show in Geneva March 3, 2015. REUTERS/Arnd Wiegmann

The Munich-based carmaker was due to publish full results on March 18 but released some preliminary numbers early following a supervisory board meeting on Thursday.

The preliminary release showed that earnings before interest and tax (EBIT) rose 14 percent to 9.1 billion euros ($9.7 billion) in 2014, above the 8.96 billion euros average forecast in a Reuters poll.

BMW Group’s earnings were lifted by record car deliveries during the year, but analysts said the operating margin at its automotive division had come in lower than they had hoped in the fourth quarter.

They said the margin on automotive earnings before interest and tax (EBIT) fell to 8.2 percent in the fourth quarter of 2014 from 9.2 percent a year earlier.

For the year as a whole, BMW said the automotive margin was 9.6 percent, at the upper end of its 8-10 percent target.

“BMW surprised negatively for the first time in recent memory with an auto margin of just 8.2 percent in the fourth quarter, the lowest since BMW was emerging from the crisis in the first quarter 2010,” said Exane BNP Paribas analyst Stuart Pearson.

The company’s shares fell as much as 2 percent after the results release with analysts saying the disappointing fourth-quarter margin and a lower-than-expected dividend were factors.

At 10.26 a.m. EDT, BMW’s shares were down 0.6 percent.


“Investors will likely be disappointed with the autos margin which fell back to 8.2 percent,” analysts at Evercore ISI said, adding that they were hoping for more details when full results are released next week.

“At this point, we do not have any clarity on the extent to which China dealer support may have contributed to the cost burden in Q4,” Evercore ISI said.

BMW’s main Chinese dealership group said in January the Germany carmaker would pay some $800 million compensate dealers for falling sales late last year.

BMW proposed a 2.90 euros dividend for 2014, up from 2.60 euros in 2013 but not as high as some analysts had hoped. Evercore ISI analysts said they had expected a dividend proposal of 3.30 euros, or a payout ratio of about 35 percent.

Frank Schwope, analyst at NordLB, said BMW’s results also come at a time when investors are taking profits after Germany’s blue-chip index reached record levels.

“The dividend was on the light side, but the shares are also lower because investors think it is a good time to take some profits,” Schwope said.

Deliveries of BMW’s core brand reached a record 1.81 million last year, driven by a 37 percent rise in demand for the X5 sports utility vehicle and volume growth in all major regions, including a 6.4 percent jump in Europe, BMW said.

By comparison, Audi sold 1.74 million cars and Mercedes-Benz sold 1.65 million of its own-branded passenger cars.

BMW reiterated that it is aiming to sell a record number of cars this year.

Editing by Georgina Prodhan and David Clarke

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