BMW boss Oliver Zipse (56) had already warned at the beginning of July: The second quarter would be “worst quarter that BMW has ever experienced”. The full extent of the coronavirus crisis with the weeks-long worldwide lockdown of factories and sales outlets still seemed to surprise BMW investors on Wednesday. The one noted in the Dax BMW common stock fell more than four percent at the top.
At BMWthe bottom line in the second quarter was a loss of 212 million euros, the Dax group announced on Wednesday. A year ago, BMW had made a profit of 1.48 billion euros. It is the first quarterly loss since 2009. Sales fell by 22 percent to just under 20 billion euros.
Before interest and taxes, the loss was 666 million euros. That was more than analysts estimated. For comparison: in the previous year, Bayern earned more than 2.2 billion euros in the second quarter before interest and taxes (EBIT) Nevertheless, after the first half of the year, there is still a pre-tax profit of 498 million euros.
In the second quarter alone, the auto division posted an operational loss of 1.55 billion euros, after a profit of 1.47 billion euros a year ago. The operating margin in the core division dropped to minus 10.4 percent in the quarter after plus 6.5 percent a year ago. The executive board expects the operating return on sales (EBIT margin) in the auto business to shrink to zero to three percent for the full year.
BMW expects sales to drop by at least 10 percent in 2020
According to BMW estimates, the market for luxury vehicles is likely to collapse by a fifth this year. “In the premium segment, despite the current recovery tendencies, we expect a significant drop in sales of almost 20 percent for the year as a whole,” said CFO Nicolas Peter (58) on Wednesday when the figures were presented. For itself, the BMW Group continues to expect sales this year “well below the previous year”. In the terminology of the group, this means a decrease of more than ten percent.
CEO Zipse made a ray of hope in July. “Our sales of automobiles at Group level were well above the previous year,” said Zipse. In Germany, the reduction in value added tax had a positive effect. Zipse also referred to a relatively low basis for comparison due to a model change in China in the same month last year.
The management confirmed the financial forecasts for the current year, Zipse spoke of “cautious optimism” for the second half of the year. In the remainder of the year, BMW will have to go a step further in view of the extremely weak figures in the auto division.
BMW continues to burn money in the auto division
There is an urgent need for action, especially with regard to free cash flow in the auto division: BMW has now lost an additional 295 million euros after a cash outflow of 2.2 billion euros in the first quarter. “Against the background of the current situation, we postpone projects or put them to the test,” said Chief Financial Officer Nicolas Peter (58). “As announced, we also systematically reduced inventories in the second quarter in order to support free cash flow.”
BMW only wants to cut back on research and development with caution. As announced, Zipse intends to spend more than 30 billion euros by 2025. In the second quarter, research and development expenditure rose by 3.5 percent to 1.5 billion euros.
Hope in china
The BMW brand delivered 430,344 cars 23 percent fewer in the second quarter, including the small car brand Mini and the luxury cars from Rolls Royce, the minus even rose to a quarter. In China In contrast, BMW, the most important single market, sold 17 percent more cars than a year ago. The development of the Chinese joint venture was positive, it said.
Also Volkswagen and Daimlerslipped into the red between April and the end of June. Most of the car factories in Europe and North America were shut down between mid-March and the end of April, and demand almost completely collapsed due to closed car dealerships. Even after that, the plants only slowly started up again.