BMW Expects Sharply Lower Profits As Coronavirus Strikes.
“Uncertainty is everywhere, but we commend BMW for attempting to quantify (the virus) impact and guiding through the uncertainty”
BMW said it expects profits to maybe halve in 2020, as the impact of the coronavirus hits sales, economies and consumer confidence.
BMW said the impact of the coronavirus made it difficult to accurately forecast its results in 2020.
“Group profit before tax is expected to be significantly lower (in 2020) that in 2019,” BMW said in a statement, with the automotive profit margin based on earnings before interest and tax (EBIT) dropping to between 2% and 4%.
In 2019, the automotive operating margin fell to 4.9% from 7.2% the previous year.
Investment researcher Evercore ISI described BMW’s forecast as “brave”.
“Uncertainty is everywhere, but we commend BMW for attempting to quantify (the virus) impact and guiding through the uncertainty,” Evercore ISI said.
Evercore ISI calculated that this represented about a 4 billion euro ($4.4 billion) EBIT hit.
In 2019 BMW EBIT fell 17% to 7.4 billion euros ($8 billion) compared with the previous year.
Despite the shaky outlook, BMW said it would invest 30 billion euros ($33 billion) on research and development until 2025 to develop electric and hybrid vehicles.
Norddeutsche Landesbank Girozentrale analyst Frank Schwope said current pressure on the automotive industry as it avoids trade disputes, and spends huge sums on electric cars and autonomous ones, is being made worse by the coronavirus. This could lead to some hitherto unthinkable mergers, for instance BMW and its premium rival Mercedes parent Daimler.
“After the crisis, the automotive world could be very different due to consolidation. It is quite possible that BMW, which is already working with (Stuttgart-based) Daimler in certain areas, will move closer to the Stuttgart company, or that a merger will take place.