Affected by the COVID-19 pandemic, German automaker BMW AG on Tuesday cut its financial forecasts, saying it expects sales to be “significantly down” this year compared with last year, prompting earnings to “deteriorate, particularly in the first half.”
Profit margins in the group’s automotive segment are likely to fall to a range between zero and 3 percent, rather than between 2 and 4 percent as previously expected, it said.
“Uncertainty surrounding the global spread of coronavirus and its consequences make it difficult to accurately forecast,” BMW said, sticking to its expectations of pretax profit “significantly below” last year’s levels.
Photo: AFP
“The highest negative impact is expected in the second quarter of 2020,” BMW said.
The automaker yesterday reported a first-quarter net profit down only slightly on last year’s levels as the novel coronavirus slashed sales, but the comparison was distorted by a massive charge that hit the manufacturer last year.
In January-to-March, BMW sold 21 percent fewer vehicles year-on-year at 477,000, even as its bottom line fell just 2.4 percent to 574 million euros (US$620 million).
Photo: Reuters
Now, “we are gradually ramping up our production again according to demand in each market,” BMW chief executive Oliver Zipse said, adding that “liquidity has absolute priority in this situation.”
The Munich-based group has slashed the amount it plans to invest over the course of this year from almost 6 billion euros to “less than 4 billion” euros, Zipse added.
“In view of the current situation, we will either put certain projects on hold or subject them to further review,” he said.
Separately, Fiat Chrysler Automobiles NV on Tuesday reported a first-quarter net loss of 1.7 billion euros due to a steep decline in vehicle sales triggered by the pandemic, and said the impact on the second quarter would be even more severe.
The automaker has withdrawn full-year earnings forecasts due to the volatility of the virus-provoked economic crisis, which includes stalled production and shuttered dealerships.
However, it said that an internal stress-test indicates it could survive a 50 percent reduction in volumes by slashing costs and cash burn.
Fiat CEO Mike Manley told analysts that despite the crisis, the terms of a full merger deal with French automaker PSA Peugeot had not been changed, and that the aim remains to complete it by the end of this year or early next year.
The first-quarter loss compared with earnings of 619 million euros during the same period last year. Revenue sank 16 percent to 20.5 billion euros, as global shipments slumped 21 percent to 818,000, with production suspended in all regions and global demand collapsing.
Manley said the company expects a net loss and “significant’’ negative cash flows’’ in the second quarter.
“The pandemic and its impact is here for the foreseeable future, and it has caused us to rethink our entire business model,’’ Manley said, adding that the recovery would depend on what economic incentives governments devise.
Additional reporting by AP
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