BMW Q2 2013 Profit Drops 8.8% Due to Increased Spending - Profit Margin Below Audi's

Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury vehicles, reported an 8.8 percent drop in second-quarter profit as spending on new models to stay ahead of competitors offset higher sales.

Investments to expand factories and produce carbon-fiber parts for its first electric car caused the decline, even as cost-cutting lifted other European auto manufacturers. Earnings before interest and taxes fell to 2.07 billion euros ($2.74 billion) from 2.27 billion euros, the Munich-based said today. Revenue rose 1.8 percent to 19.6 billion euros on a 6.6 percent gain in car deliveries.

BMW is rolling out 25 new models in 2013 and 2014, with 10 of them, such as the Rolls-Royce Wraith, having no predecessor. Rivals aren’t standing still. Mercedes is bringing out 13 all-new models by the end of the decade. Audi plans to double its SUV lineup to six by 2020, a person familiar with the matter said in February.

Global deliveries of the BMW brand rose 7.7 percent in the first half to 804,248 cars and SUVs, maintaining a 23,748-vehicle lead over Audi. Mercedes trailed behind in third place, with 694,433 deliveries.

The second-quarter margin at BMW’s auto division declined to 9.6 percent from 11.6 percent a year earlier and compares with a second-quarter operating margin of 9.9 percent at Audi and 6.4 at Mercedes. BMW reiterated today that Ebit at the auto division will be in the range of 8 percent to 10 percent of sales this year.

“Challenges are what drive us,” said Reithofer. “We intend to remain the industry leader.”
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M5twinturbo - 8/1/2013 12:07:48 PM

+5 Boost

0.4% difference for BMW an independent company compared to VW's luxury brand is quite impressive.

CaddySeville - 8/1/2013 12:47:59 PM

0 Boost

stop, your spin is making me dizzy.

Dr550 - 8/1/2013 6:15:42 PM

+2 Boost

Same comparison with Lexus beneath mothership Toyota. Platform and engine sharing, buying power, marketing, etc. I wonder how much the the ES/RX would cost Lexus without Toyota.

GermanNut - 8/1/2013 12:25:43 PM

-4 Boost

BMW's results were pretty bad:

“BMW is the only carmaker in Europe who didn’t surprise positively in the second quarter,” said Daniel Schwarz, a Frankfurt-based analyst with Commerzbank AG.

The maker of BMW, Mini and Rolls-Royce vehicles is investing in the battery-powered i3, the new 4-Series coupe and an upgrade of the X5 sport-utility vehicle. The expansion is part of the company’s effort to maintain its sales lead over Volkswagen AG (VOW)’s Audi and Daimler AG (DAI)’s Mercedes-Benz, which have both vowed to pass BMW by the end of the decade and reported stronger earnings in the second quarter.

BMW shares fell as much as 3.1 percent to 71.31 euros and were down 1.7 percent at 12:06 p.m. in Frankfurt trading, making it the worst performer in Germany’s benchmark Dax index. The stock has declined 0.8 percent this year, valuing the company at 46.6 billion euros.

‘Dynamic’ Competitors

VW yesterday posted a surprise 1.8 percent increase in second-quarter operating profit after sales advanced 8.5 percent. Daimler’s second-quarter Ebit more than doubled and the company forecast second-half gains, backed by the new Mercedes CLA compact four-door coupe and a new generation of the top-of-the-line S-Class.

BMW’s figures are “slightly disappointing compared to Volkswagen and Daimler,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “VW especially showed considerably more dynamic.”

BMW spent 2.4 billion euros to upgrade and expand factories in the first half, 60 percent more than a year ago. Research and development expenses will exceed the company’s target of 5 percent to 5.5 percent of revenue for all of 2013 after amounting to 5.3 percent in the first six months.

“We have always taken a long-term approach,” Chief Executive Officer Norbert Reithofer said today on a conference call. “That’s why we are making some major investments right now to ensure we continue our success in the future.”

Steady Forecast
BMW stuck to a forecast for 2013 pretax profit to be “on a similar scale” to last year’s 7.82 billion euros, even as sales rise. With pretax profit about unchanged at 4.04 billion after the first six months of year, that means essentially flat earnings in the second half. Daimler and VW are both forecasting growth for the remainder of 2013.

BMW4me4ever - 8/1/2013 12:52:54 PM

+4 Boost

BMW is not in trouble yet it is harder to maintain profits at record pace when you are introducing 23 New models in the next 16 months. Audi has the luxury of using VW technology and platforms to help keep profit at a very high level. That is a tremendous boost and such.

GreenMachine - 8/1/2013 5:03:01 PM

+2 Boost

(Reuters) - German carmaker Volkswagen said on Wednesday that first-half operating profit of its flagship Audi luxury division fell 8 percent to 2.64 billion euros ($3.50 billion) from 2.87 billion a year ago.

GreenMachine - 8/1/2013 5:05:29 PM

+2 Boost

btw audi's 2.64 billion euros profit is the first six months of 2013.

in comparison, bmw's 4.04 billion euros profit in the first six months in 2013 is about unchanged over 2012.

GreenMachine - 8/1/2013 5:07:43 PM

+2 Boost

i don't get why audi posts such low profits. with their whole vw rebadging strategy, engine/platform sharing, they're still making a LOT less than BMW does.

Yonder7 - 8/1/2013 1:28:07 PM

+1 Boost

BMW4me4ever, I agree with you. Thats why (Believe it or not) Audi have the best chances to take down BMW and MB. BMW and MB will have to introduce a lot of cheap cars if they want to keep alive. While AUDI will have the back up VW all the way...I love MB and I really like BMW but honestly those are not FULL LUXURY Cars companies any more. MB Still have the guts to build the AMGs and 12 cylinders cars but Big expensive cars profits are very low. In that sense 5GT, 6GC, and all 6 series and anything with M badge is a fail in profits, Same goes for CL, SL, G, and anything with an AMG badge, it wont matter how much we like those companies.

scenicbyway12 - 8/1/2013 10:59:21 PM

+2 Boost

I remember 10 or 12 years ago BMW took in 720 million Euro's in profit for the quarter and spent 780 millions Euro in R & D. Advantage of fewer stock holders.