News ID : 3068
Publish Date : 02 August 2018 - 12:42
BMW AG is sticking with its annual profit targets, even as the German automaker finds itself in the crosshairs of a U.S.-China trade spat.
Khodrocar-The Munich-based manufacturer kept its forecast for the year when reporting second-quarter results on Thursday, emaking it an outlier among a host of car companies -- including top rival Daimler AG -- that have cut financial targets as global trade tensions escalate and higher raw-materials prices weigh.

Group profit before taxes will be at the same level as last year, BMW said, while reiterating automotive revenue and unit sales would gain slightly. While it had previously said profit would be "at least” level -- implying it could rise -- it still held to the goal, marking a contrast with the decision by Mercedes-Benz maker Daimler to lower its guidance.

President Trump underscored the danger on Wednesday, when he asked U.S. trade officials to consider increasing tariffs on $200 billion in Chinese goods.

"It’s all about what’s happening at the macro-level outside the company’s control,” said Frank Biller, a Stuttgart-based analyst with Landesbank Baden-Wuerttemberg. "BMW is shipping vehicles with strong margins from the U.S. to China, and they’re hostage to the negative effect of the trade tensions.”

Shares of BMW fell 1.8 percent to 80 euros at 9:42 a.m. in Frankfurt, with Daimler and VW also declining. The stock is down 8.1 percent this year, as the world’s second-biggest luxury carmaker grapples with shifts in global trade barriers -- a trend evident in second-quarter results.

After China said it would lower import tariffs from July 1, consumers held back on buying cars and demanded price reductions. BMW said earnings before interest and taxes fell 6.3 percent in the period, highlighting similar issues already reported by Daimler and Fiat Chrysler Automobiles NV.

President Donald Trump’s trade spat with the Asian nation is having an ongoing impact. Despite lowering import tariffs on cars from other nations, China has slapped retaliatory duties on U.S. car imports, hitting BMW’s shipments of sport-utility vehicles it makes in Spartanburg, South Carolina.

"We are consistently preparing ourselves to meet the demands of tomorrow,” Chief Executive Harald Krueger said in a statement. This is "all the more important during challenging times.”

Higher raw materials prices and currency issues also contributed to the Ebita drop to 2.75 billion euros ($3.2 billion). The results beat the 2.68 billion-euro estimate compiled by Bloomberg.
Trade Tension

Trump has also taken aim at European Union car tariffs, adding to headaches for carmakers already navigating the costly shift to electric cars. BMW, with sales growth slowing to 1.8 percent during the first half of the year, has forecast stronger momentum during the second half from new models like the X2 compact sport utility vehicle.

In China, where BMW has agreed to raise its stake in its joint venture with Brilliance Automotive Group, vehicle sales slowed to rise just 2.2 percent, compared with a jump of more than 18 percent a year ago. The company this year started production of its popular X3 SUV in China as well as South Africa, boosting availability as well as offsetting trade tension.

The carmaker sidestepped some of the other issues hitting competitors Volkswagen AG and Daimler. Both its German rivals have flagged bottlenecks that’ll drag on deliveries during the third quarter in Europe, where cars need to undergo a new emissions testing regime starting next month. BMW said the conversion to the new procedure was going according to plan.


Source:bloomberg
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