BMW sees 2013 pretax profits flat on new-model rollout, Europe woes
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(Bloomberg) -- BMW AG forecast unchanged 2013 pretax profit as European auto sales drop and BMW spends money to bring out 25 new models in the next two years.
"The global financial environment is both uncertain and volatile," CEO Norbert Reithofer said today at the company's annual press conference. "Our business performance is exposed to many risks."
Volkswagen AG and Daimler AG forecast last month that 2013 operating profit will remain at last year's level as the region's auto market shrinks for a sixth straight year.
BMW, VW and Daimler all posted European sales drops in February, according to data released today from the ACEA industry group.
BMW is locked in a tight race with VW's Audi for the global top spot in deliveries, with the BMW brand's lead contracting to just 407 vehicles in the first two months.
Profitability at BMW's automotive unit dropped in 2012 as the premium manufacturer invests in the new models to keep Audi, which has vowed to nab the No. 1 post by 2020, at bay.
"BMW can't escape the very weak European market and needs to step up investments as the current models are aging," said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler who recommends selling the shares. "Profit will drop this year and margins will fall."
BMW shares have declined 1.9 percent this year, valuing the German company at 45.8 billion euros ($59 billion).
New models
BMW is bringing out 11 models this year, including the 3-series GT and 4-series coupe, and preparing to roll out its first electric vehicle, the i3 city car, in pursuit of its third consecutive year of record sales.
Of the 25 new vehicles coming to market through 2014, 10 of them have, such as the X4 SUV, are new to the lineup, Reithofer said.
The manufacturer will increase spending for research and development this year, CFO Friedrich Eichiner said today, with the percentage of development spending to sales in 2013 exceeding the targeted range of 5 percent to 5.5 percent.
The figure was 5.1 percent in 2012. Europe's car-sales contraction accelerated in February on a steepening decline in Germany, the region's biggest market. Registrations dropped 10 percent to 829,359 vehicles, the Brussels-based ACEA, said today. BMW's deliveries in the region last month dropped 2.8 percent.
"The high returns of the past years can't be perceived as the normal state," Eichiner said. "We have to deal with high up-front investments in new technologies to reach our ambitious targets."
Global lead
The automaker's sales globally will likely rise less than 10 percent this year, the automaker said today.
"We're not going to chase volume at all costs, this is not our business," sales chief Ian Robertson said in an interview, adding that he was confident that BMW will "retain the global premium position on the group level."
Pretax profit climbed 6 percent to 7.82 billion euros in 2012 as revenue climbed 12 percent to 76.8 billion euros, the automaker said last week.
Profit at this level is forecast to drop to 7.72 billion euros in 2013, according to the average of 14 analyst estimates compiled by Bloomberg.
Earnings last year benefited from tailwinds worth 1.03 billion euros, Eichiner said today in his speech at the event.
Profit hit
Profitability at Germany's luxury-auto makers is taking a hit as the three spend money to stay ahead in design and technology, and Europe's declining auto market leads to higher discounts.
Earnings before interest and taxes at the car division last year declined to 10.9 percent of sales from 11.8 percent in 2011 and lagging behind Audi's 11 percent margin.
Mercedes sunk deeper into third place with an operating margin of 7.1 percent. BMW's 2013 return on sales will be in its long-term target range of 8 percent to 10 percent, the automaker said.
BMW solidified its sales lead in 2012 with a 12 percent increase to 1.54 million BMW-brand vehicles on demand for the new 3-series sedan, 1-series compact and X1 and X3 SUVs.
Audi's deliveries expanded 12 percent to 1.46 million cars, while Mercedes's sales rose 4.7 percent to 1.32 million cars.
To secure its grip on the premium segment's top spot, BMW last week appointed Peter Schwarzenbauer, the former Audi sales chief, to run the Mini, Rolls-Royce and BMW motorcycle brands as well as after-sales operations.
Schwarzenbauer will replace Harald Krueger, who will become production chief. The carmaker's factories are currently running beyond full capacity to meet customer demand outside Europe, BMW said today.
Mercedes is also expanding production for its compact car lineup, adding the CLA four-door coupe to complement the new A- and B-Class vehicles.
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