BMW car earnings slip in first quarter

BMW said first-quarter underlying earnings in its key automotive division fell more than expected, as heavy discounts in core European markets and technology costs curbed profits from rising car sales.

Earnings before interest and tax (EBIT) declined 15.9 per cent to €1.58 billion, slightly missing a €1.60 billion consensus forecast in a Reuters survey.

The operating margin dropped to 9.9 per cent from 11.6 per cent a year earlier.

"We don't expect to receive a great deal of impetus from most European markets over the next few months," chief executive Norbert Reithofer said. "Economic conditions in these areas are likely to remain challenging."

Still, Munich-based BMW reaffirmed its target for 2013 to push vehicle sales to a new record. It also still aims to match last year's record group pretax profit and achieve an operating margin of between 8 and 10 per cent in automotive operations.

German luxury brands such as market leader BMW, Volkswagen's Audi and Mercedes have fared better in the economic downturn than their European mass-market peers such as Peugeot.

BMW is meanwhile ramping up its spending on research and development of fuel-efficient technologies to stay ahead of the game.

Operating profit at BMW group level, including motorcycles and financial services, fell less than expected to €2.04 billion, compared with a forecast of €1.83 billion.

BMW's main rival Audi, benefiting from vast resources at parent VW, posted a smaller drop in its first-quarter operating margin to 11.1 per cent from 11.4 per cent. Audi, market leader in China and Europe, is also targeting a range of 8 to 10 per cent for 2013.

Mercedes has fallen further behind its German rivals, struggling to match BMW's and Audi's scale and efficiency in smaller cars as well as their success in China. The brand's first-quarter margin plunged to 3.3 per cent from 8.2 per cent.

Parent Daimler scrapped its earnings forecast for a second time in six months on April 24th after three-month profit plunged more than half on the European malaise and Chinese distribution problems.

Reuters