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BMW has surprise Q3 profit gain on Europe recovery

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BMW posted a surprise increase in third-quarter operating profit as strong sales in higher-margin core European markets outweighed weak demand in China.

[BERLIN] BMW posted a surprise increase in third-quarter operating profit as strong sales in higher-margin core European markets outweighed weak demand in China.

BMW's quarterly sales in Europe, destination of over 40 per cent of its deliveries, were up 6.9 per cent to 545,062 cars, leading the group on Tuesday to affirm its goal of beating last year's record 2.12 million sales.

Earnings before interest and tax (EBIT) rose 4.3 per cent to 2.354 billion euros (S$3.62 billion), BMW said, matching the 2.353 billion euro top-end forecast in a Reuters poll. The poll had predicted an average 6.3 per cent drop in EBIT.

The world's biggest luxury carmaker said it still expects a profit margin in the automotive division of 8-10 per cent this year, compared with 9.6 per cent in 2014, as well as higher sales and pre-tax profit.

But the Munich-based group cited a raft of headwinds including heightening competition in the United States, upfront spending on new products and technology as well as rising personnel costs and slowing demand in China.

"The results are good but the forward perspective looks mediocre," said Frankfurt-based Bankhaus Metzler analyst Juergen Pieper who recommends holding the stock.

"The outlook doesn't reveal a particularly large amount of optimism and I don't see great momentum in 2016."

REUTERS