BMW shares slide on profit warning
By Michele Maatouk
Date: Wednesday 20 Mar 2019
(Sharecast News) - Shares in BMW slid on Wednesday as the German car maker warned that 2019 pre-tax profit would be "well below" the previous year's level amid rising manufacturing costs and announced a new cost-savings plan.
The company, whose pre-tax profit for 2018 fell 8.1% from the previous year to €9.82bn, unveiled plans to cut costs by around €12bn by 2022.
"In 2019, the BMW Group will continue to invest substantial amounts in new technologies and the mobility of the future. However, costs are also being driven up in other areas, including the significantly higher cost of complying with stricter CO2 legislation.
"Against this background, rising manufacturing costs are likely to have a dampening effect on earnings. Moreover, unfavourable currency factors and higher raw materials prices are expected to have a medium to high three-digit million negative impact. At the same time, the ongoing issue of international trade conflicts remains a source of uncertainty."
The group said development times for new vehicle models will be reduced by as much as one third. Among other savings, digital simulations and virtual validation could eliminate the need for some 2,500 expensive prototype vehicles by the year 2024.
BMW said forecasts for the current year are based on the assumption that worldwide economic and political conditions will not change significantly. Any deterioration in conditions could have a negative impact on the outlook, it added.
The company expects its EBIT margin in the automotive segment to come in at between 6% and 8% this year, below its target range of 8% to 10%.
At 1010 GMT, the shares were down 4.7% at €72.13.
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