Shares of BMW fell nearly 4 per cent on Thursday even as the company boasted records in both sales and revenue last year, as fourth quarter results included an unexpected surprise.
The German luxury carmaker, which celebrated its 100th birthday in 2016, said net profit for the year rose 8 per cent to €6.9bn, as revenues grew 2.2 per cent to €94.2bn. Operating profit, however, fell 2.2 per cent from a year earlier to €9.39bn, missing estimates at €9.82bn.
More important was that BMW’s fourth-quarter earnings before interest and tax (ebit) missed estimates by a fifth, due to €544m in losses in its “other/eliminations” reporting line, noted Arndt Ellinghorst at Evercore ISI, with group ebit at €1.8bn compared to expectations of €2.3bn.
The loss was “related to an increase in leasing activity and related intra-group profit eliminations,” he said, adding: “We are still surprised that this has had such a significant impact on earnings.”
Shares fell 3.7 per cent in early trading, a two-week low. Since a high in March 2015, BMW shares have fallen by nearly a third as investors worry about new threats in the car industry. Traditional leaders are grappling with a new set of challenges emerging from software groups, car-sharing trends and the displacement of petrol and diesel engines with batteries.
Chief executive Harald Krüger said BMW would target another sales volume record this year, projecting that sales would be “slightly up”. But his emphasis was less on volume and more on technology. “From 2019 onwards, we will be firmly embedding all-electric, battery-powered mobility in our core brands,” he said.
BMW has long made the argument that its high profitability will allow it to make the right investments so it can remain a leader in the premium segment. On Thursday Mr Krüger reminded investors that BMW is cooperating with US chipmaker Intel and Israeli sensor company Mobileye to shift toward mobility concepts that are “Automated, Connected, Electrified and Shared.”
BMW achieved an operating margin in the auto segment of 8.9 per cent, achieving its target range between 8 and 10 per cent for a seventh straight year but also slipping from 9.3 per cent a year earlier.
Still, Mr Krüger was upbeat: “We have turned our centenary year into the most successful 12-month period in our corporate history,” he said.