BMW Has Best Carmaking Profitability Since 2011 On SUVs

Big 5

Bayerische Motoren Werke AG (BMW), the world’s biggest manufacturer of luxury autos, reported its highest profitability from carmaking in three years as the X5 sport-utility vehicle won customers and demand rose in China.

Second-quarter earnings before interest and taxes at the auto unit widened to 11.7 percent of sales from 9.6 percent a year earlier, Munich-based BMW said today in a statement. The margin was the highest since the third quarter of 2011 and beat figures of 9.9 percent at Audi AG, the world’s second-largest maker of premium cars, and 7.9 percent at Daimler AG (DAI)’s Mercedes-Benz Cars unit.

“It’s very impressive,” Arndt Ellinghorst, an analyst ISI Group in London, said by phone. “The second half won’t be as strong, but they’ll have a stronger cash flow because they’re selling all the product.”

BMW, which reiterated a 2014 forecast today of a “significant” increase in pretax profit, is introducing 16 new or refreshed models this year to win customers and fend off efforts by Volkswagen AG’s Audi and the Mercedes brand to take the global premium-car sales lead by 2020. First-half sales of the full-size X5 jumped 30 percent, while the up-market 5-Series sedan won 7.6 percent more buyers.

“They had a very strong vehicle mix for the quarter, and prices have been stabilizing, which will have helped them significantly,” Marc-Rene Tonn, a Hamburg-based analyst with M.M. Warburg, said by phone. “Prices for cars in China have probably improved and there’s likely been a stabilization in prices in Europe” with dealers not chasing customers with significant discounts.

Stock Rises

BMW rose as much as 3.8 percent, the biggest intraday jump since March 19, and was trading up 3.1 percent at 91.16 euros as of 9:15 a.m. in Frankfurt. The stock has gained 6.9 percent this year, valuing the company at 58.7 billion euros ($78.9 billion), the third-biggest increase on Germany’s benchmark DAX Index.

Second-quarter Ebit increased 26 percent to 2.6 billion euros. Profit exceeded the 2.25 billion-euro average of 11 analyst estimates compiled by Bloomberg. Sales rose 1.8 percent to 19.9 billion euros.

The company is rolling out a van-like variant of its 2-Series compact and the plug-in hybrid i8, its first sports car in more than three decades. Those vehicles join a lineup that includes the i3 electric city car and the 4-Series coupe and convertible introduced late last year.

Delivery Target

BMW plans to deliver more than 2 million vehicles in 2014, including the Mini small-car and Rolls-Royce ultra-luxury marques, reaching an annual sales target two years ahead of schedule. First-half group deliveries rose 6.9 percent to 1.03 million cars, including a 10 percent jump at the BMW brand. Including the Mini nameplate, the carmaker’s Chinese sales surged 23 percent in mainland China in the period.

The company reiterated a margin target range of 8 percent to 10 percent, which matches Audi’s goal on an ongoing basis. Daimler Chief Executive Officer Dieter Zetsche is pushing for Mercedes to become the most profitable luxury-auto producer with a 10 percent margin goal.

The BMW brand’s lead in global sales in the first half shrank 28 percent to 16,997 vehicles ahead of Audi and fell 6.3 percent to almost 103,000 cars more than third-ranked Mercedes.

Audi, which has never held the top global luxury-car sales post for an entire year, will introduce 17 new or revamped vehicles in 2014, including a remake of the iconic TT sports car. Stuttgart, Germany-based Mercedes, which lost the lead to BMW in 2005, is bringing out 30 new models by the end of the decade.

Source : bloomberg