BERLIN -- BMW AG said Tuesday that third-quarter net profit slumped 74% from a year earlier as demand for its luxury cars remained anemic amid the global economic downturn.
The German auto maker reported net profit fell to €78 million ($115.2 million) from €298 million in the same period in 2008, reflecting a plunge in premium car sales over the past year. Shares in the Munich-based auto maker fell 6.3% to €31.45 as the results came in below analysts' estimates.
Revenue declined 6.6% to €11.8 billion from €12.6 billion, while the company's closely watched earnings before interest and tax, or EBIT, contracted 86% to €55 million from €387 million on a year-to-year basis.
BMW Chief Executive Norbert Reithofer said in a statement that the company expected global auto markets to make a gradual recovery over the coming year. In particular, BMW should gain sales momentum from the launches of new models such as its X1 compact sports-utility vehicle and the 5-Series Gran Turismo, he said.
Still, Mr. Reithofer cautioned that auto markets in the U.S. and Europe would grow only slowly over the next several quarters. "It is still too early to give the all-clear for the world's automobile markets," he said.
BMW was particularly hard hit earlier this year and posted a loss in the first quarter as demand for premium cars came to a grinding halt. It was especially exposed to the downturn in the U.S., which until recently was the company's largest sales region ahead of its domestic market in Germany.
The world's biggest luxury-car maker by sales controlled some of the damage by scaling back production earlier than many other auto makers and keeping cash burn at a relatively modest level. BMW also initiated a wide-ranging program to trim costs and improve efficiency.
BMW, whose brands also include Mini and Rolls Royce, reiterated that if the economy doesn't worsen, the car maker expects vehicle sales this year to decline by only 10% to 15% from the 1.43 million vehicles it sold last year. If it meets that sales target, it said it would post a profit for the full year. In the third quarter, BMW said its care sales declined 7.2% compared to a year earlier to 324,100 vehicles.
The company's shares have gained around 20% in value over the past six months, outperforming a 4% rise of the Dow Jones Stoxx Europe 600 automotive and parts sector index, as investors expect premium auto makers to be hurt less by an anticipated slump in demand after state-backed scrapping incentives in many markets expire. These scrapping incentives mainly revived demand for smaller cars rather than big luxury sedans.
Mr. Reithofer added that BMW still targets a return on sales in its auto segment of between 8% and 10% in 2012 and a return on capital employed of more than 26%.
BMW plans to exceed its initial target of €4 billion of material cost reductions by 2012 as part of a wide-ranging cost-cutting target of €6 billion. Reducing expenses in materials, production and development are expected to account for two-thirds of the planned overall cost reduction.
source: online.wsj
