FRANKFURT -- BMW said the impact of the coronavirus will likely hurt demand and profit throughout the year, forcing the automaker to lower its profit outlook following a slowdown in first-quarter deliveries.
The automaker forecast a full-year automotive earnings before interest and taxes margin of 0 percent to 3 percent, versus the 2 percent to 4 percent range it had estimated before demand was decimated by government restrictions aimed at slowing the coronavirus outbreak.
"The BMW Group still expects the spread of the coronavirus and the necessary containment measures to seriously dampen demand across all major markets over the entire year 2020," the company said in a statement on Wednesday.
BMW CEO Oliver Zipse said: "The situation remains serious. We are keeping a tight rein on inventory levels because liquidity has absolute priority in this situation."
Free cash flow at the automotive business was minus 2.2 billion euros ($2.4 billion) in the first quarter and BMW said it no longer expected to achieve positive free cash flow in 2020, despite cutting back investments.
BMW reported a 133 percent rise in first-quarter earnings before interest and taxes to 1.38 billion euros ($1.5 billion,) due to the absence of a one-off provision in the year-earlier period. That compared with 589 million euros ($636 million) in the same period a year earlier, when the result was pulled down by a 1.4 billion euro provision for a potential antitrust fine from the European Union’s investigation into alleged collusion on cleaner-emissions cars.
The automaker's automotive EBIT margin rose to 1.3 percent from minus 1.6 percent a year earlier. Jefferies automotive analyst Philippe Houchois described the margin as disappointing, given solid sales of typically more profitable SUVs.
First-quarter vehicle deliveries fell 21 percent to 477,111 on the impact of the coronavirus.
Further margin pressure could come from a longer recession in major markets, distortions caused by an even stronger competitive environment or from a second wave of infections and associated containment measures, BMW said.
While BMW's first quarter looks "fairly good," the current period will mark the trough, said Bankhaus Metzler analyst Juergen Pieper. "A loss is very likely, revenues could be down as much as 25 percent to 30 percent," he said.