Munich: BMW AG showed signs of recovery under its new chief executive officer, beating analyst estimates in the third quarter on aggressive cost-cutting and demand for upscale models like the big X7 SUV.
After stumbling in recent quarters with low profitability and a series of operational and regulatory issues, BMW reported a 33 per cent jump in earnings before interest and taxes to 2.29 billion euros ($2.54 billion) in CEO Oliver Zipse’s first quarter in charge. The figure beat analyst expectations of 2.12 billion euros.
“The efficiency-boosting measures we have implemented are bearing fruit,” Chief Financial Officer Nicolas Peter said in a statement on Wednesday. “Nonetheless, we aspire to achieve more than that.”
The Munich-based manufacturer is pressing ahead with a cost-cutting program aimed at saving more than 12 billion euros to help pay for electric vehicles and digital features like automated driving. Research and development expenses climbed 9.4 per cent to 4.25 billion euros in the first nine months of 2019.
BMW’s automotive profit margin widened to 6.6 per cent from 4.4 per cent a year ago, when it faced disruptions from regulatory bottlenecks that caused a widespread slump in European car sales. Still, the figure is below its target range of 8 per cent to 10 per cent.
BMW has been relying on sales of high-end cars, including the new X7, and demand from China, where deliveries have surged 14.5 per cent this year.
The push into battery-powered vehicles is picking up pace. The electric variant of the Mini will start production this month, followed by the BMW iX3 next year. The company is straining to meet tighter environmental regulations that start next year in Europe and would impose tough fines on carmakers whose average car emissions exceed 95 grams carbon-dioxide per kilometre.
Amid the tougher regulatory pressure and slowing demand in key markets, carmakers are looking to cut costs. Ford Motor Co. cut its full-year forecast in October, while Volkswagen AG’s CFO Frank Witter last week warned the next two years will be tough.
Shares of BMW were up 0.4 per cent to 72.99 euros on Tradegate compared to Tuesday’s close. The stock rose 3 per cent for the year after close on Tuesday.
The results represent “a first positive sign after several disappointing quarters,” Juergen Pieper, an analyst at Bankhaus Metzler, said in an emailed note. “It signals a change to higher momentum at all levels under the new CEO Zipse.”