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Jacob Maslow
Jacob Maslow
Articles (128)  | Author's Website |

BMW Increases Investments, Pretax Profits Fall 6% in 3rd Quarter

Company blames technology investments for loss

November 14, 2017 | About:

Bayerische Motoren Werke AG (BMW) released its third-quarter earnings last week, reporting pretax profits fell 6% year over year. The automaker's profits slipped to 2.42 billion euros ($2.85 billion) due to the company's commitment to advanced technologies and development of new models.

The profit decline was offset by the increase in full-year tax profit guidance.

BMW's revenue for the quarter rose 0.3% compared to the prior year, reaching 23.4 billion euros. The company sold 1.2% more autos than the previous year, rising from 583,499 units to 590,415 units. Motorcycle sales rose 11.7% from 35,290 units to 39,429 units. Earnings before interest and tax fell 3.2% from 2.38 billion euros to 2.30 billion euros.

The company's net profit also fell to 1.79 billion euros, down 1.8% from 1.82 billion euros. Operating cash flow for the automotive segment also rose 15.6% from 2.37 billion euros to 2.74 billion euros.

The company's stock has declined 2.77% since the earnings release, but is up 7.47% in the trailing 90-day period and 6.58% in the trailing 12-month period.

BMW's third-quarter profits were impacted by three main factors: the company suffered unfavorable exchange rate movements, consumers moved away from SUVs and small cars during the quarter and the dip led to an unfavorable product mix that harmed quarterly profits.

Research and development costs also rose to 3.485 billion euros. The 14.3% rise in R&D costs was primarily attributed to the company introducing or revamping 40 models across three of the company's brands. BMW is also working on autonomous vehicle systems to reduce car accidents and improve safety. Electric drivetrains are also being heavily invested in as automakers make a push to electric and autonomous vehicles.

BMW's new models push is a result of the company losing ground to Daimler AG's (DDAIF) Mercedes Benz luxury vehicles.

The company's BMW brand sold 499,467 units, up 1.2%. Its X1 SUV and 1 Series saw significant sales increases during the quarter. The company's China segment also witnessed significant growth. The company's Mini brand saw sales increase 1.1% to 90,180 units.

Rolls-Royce sales slumped to just 768 units, down 18.4%. The company ended production of the Phantom sedan earlier in the year and will begin producing a new Phantom in January.

BMW Motorrad deliveries rose 11.7%, boosting the company's motorcycle unit sales to 514 million euros.

BMW increased its full-year guidance with a "solid increase" in 2017 deliveries. The company expects EBIT margins to fall between 8% and 10%.

Disclosure: The writer has no stakes in the companies mentioned.

About the author:

Jacob Maslow

Jacob Maslow is a writer who began his career as a payroll manager. The same affinity for numbers that originally led him to an early career in accounting now comes in handy when it comes to understanding and working with marketing analytics.

A native of New York, Maslow is now based in the Middle East, where he lives with his wife and five children and provides high-quality services to clients in a variety of industries, including the legal, medical and financial sectors.

In addition to his marketing and consulting work, Maslow has founded a variety of news websites, including Legal Scoops. He is a frequent contributor to a variety of publications including business.com and business2community.com.

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