BMW Reports 61% Drop in Third-Quarter Profit

By Nick Carey

(Reuters) – BMW on Wednesday reported a 61% drop in its third-quarter profit that missed analyst expectations due to slumping China sales and brake issues. However, the company stated it is on track to meet its adjusted full-year financial outlook.

In a statement, BMW (ETR:BMWG) CEO Oliver Zipse mentioned, "after extraordinary challenges in the third quarter … in the fourth quarter we are back on track for stronger earnings to achieve our annual targets."

Shares in the company were indicated to open 3.1% lower at 0737 GMT, the weakest among German car stocks. Zipse noted that conditions in China remain challenging, affecting all market participants.

In September, BMW lowered its guidance for the year, citing sluggish demand in China and issues with a braking system supplied by Continental. By October, the automaker reported that its third-quarter sales in China had fallen by a third.

Rival German automakers Volkswagen (ETR:VOWG_p) and Mercedes-Benz (OTC:MBGAF) are also experiencing declining sales in China amid a weak economy and heightened competition.

BMW disclosed that the brake issue affected over 1.5 million cars, with delivery delays expected for approximately 320,000 vehicles. The company announced it would deliver those delayed vehicles to customers in the fourth quarter.

For the third quarter, BMW posted an operating profit of 1.7 billion euros ($1.82 billion), down 61% from 4.352 billion euros in the same quarter last year. Analysts had anticipated an operating profit of 1.8 billion euros.

The company's revenue fell 15.7% to 32.4 billion euros from 38.46 billion euros a year earlier, falling short of analyst expectations of 34.3 billion euros.

Despite the current challenges, BMW remains on track for a 2024 operating profit margin of between 6% and 7%. The automotive segment's operating profit margin for the third quarter was just 2.3%.

BMW's Chief Financial Officer, Walter Mertl, stated that with stringent management, BMW Group "remains on track" to meet its 2024 auto free cash flow target.

He added, "In the fourth quarter, sequentially higher deliveries and a stronger product mix will support our earnings."

($1 = 0.9179 euros)