BMW Revenue Drops Despite Sales Growth
German premium auto manufacturer BMW has reported a 4.5% year-on-year (y-o-y) decline in Q113 profits, despite an increase in global sales volumes. The company experienced stark regional variation in sales growth, generally commensurate with BMI 's regional outlook. Further in line with our views, the company is increasingly shifting its global production base to higher-growth markets.
Q113 earnings before interest and taxes (EBIT) declined to EUR2.04bn (US$2.69bn), from EUR2.13bn (US$2.8bn) in Q112. The company's profit margin declined to 9.9% in Q113, down from 11.6% in Q112. Group revenues declined 4.1% y-o-y in Q113, to EUR 17,546mn (US$23,095mn). The company also faced higher expenditure on new technologies, changing regional sales mix, ongoing product development costs as it releases new models, and increased personnel expenses.
Despite this decline in the first three months of the year, the company maintains its existing 2013 pre-tax profit target on the back of rising demand in China and the United States offsetting declines in the European market. BMW expects EBIT for the full year to be in the range of 8% to 10%.
A number of vehicle manufacturers and autos suppliers have revised down their 2013 global sales forecasts on the back of an increasingly bearish European sales outlook ( see our online service, April 26, 'Daimler Drops 2013 Target As Markets Drop' ). As BMW is increasingly shifting its focus towards higher-growth emerging markets, however, the European market constitutes a smaller percentage of its global sales footprint.
The company's g lobal sales volume s increased 7.0% y-o-y, to 381,404 units. In line with many other autos companies and BMI 's core views, BMW reported a stark regional contrast in sales growth.
It s sales in the USA increased 4.2% y-o-y, to 79,117 units, and sales in China increased 7.5% y-o-y, to 86,224 units. BMI maintains a bullish outlook for sales growth in these markets, and we expect them to continue to be key sources of growth for the company.
The company's sales in many markets in Europe declined in Q113, however, and BMW does not expect to see much growth in the market over the short term. BMI expects the regional market to continue to fall in 2013, and we recently revised down several sales forecasts for the year on the back of an increasingly poor consumer outlook and low year-to-date sales ( see our online service, April 18, 'Bearish Forecast Revisions As Sales Declines Continue' ).
BMW aims to maintain its current position of global leader in the premium segment, ahead of Audi and Mercedes-Benz . To this end, the company is to add some 25 new models globally by end-2014. In line with BMI 's core view, much of this growth is expected to come from emerging markets, where we have long-highlighted a premiumisation trend. Indeed, the company has recently invested in a factory in the high-growth Brazil market, and is also reported to be looking into entering the Russian market.