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BMW shares hit by 2023 margin disappointment, profit drop

Published 03/14/2024, 08:35 AM
Updated 03/14/2024, 11:47 AM
© Reuters. FILE PHOTO: The logo of German automaker BMW is seen in Brussels, Belgium June 1, 2023. REUTERS/Yves Herman/FILE PHOTO

By Andrey Sychev

(Reuters) -BMW's shares slipped 2.7% on Thursday after the German luxury carmaker reported a core automotive margin on 2023 earnings before interest and taxes (EBIT) of 9.8%, short of the 9.9% forecast by analysts in a company-provided consensus.

Higher research and development (R&D) spending, increased manufacturing costs and a higher share of electrified vehicles have weighed on BMW (ETR:BMWG)'s margins, JPMorgan analysts said.

Munich-based BMW's result compares with an automotive core margin of 12.6% reported by its rival Mercedes Benz (ETR:MBGn) in 2023.

BMW's R&D costs rose by 13.8% to a 7.5 billion euro ($8.2 billion) high last year as it focused on further electrification and digitalization of its vehicles and automated driving.

Its 2023 group revenues rose 9% to 155 billion euros, partly thanks to the full consolidation of its BMW Brilliance Automotive (BBA) Chinese joint venture.

But annual net profit fell as expected by more than a third to 12 billion euros, due to a higher comparable base of 2022 following the consolidation of BBA.

BMW said its board will therefore propose a lower dividend of 6 euros per share for the year, 2.5 euros less than in 2022.

The carmaker, which revalued the BBA stake in 2022 and increased its net profit, said that "without the one-time revaluation effect, the group net profit would have been higher year-on-year".

BMW said its revenue rise was also driven by higher sales of its top-end and electric vehicle (EV) models. It delivered 74% more EV vehicles last year than in 2022, achieving a 15% share of group sales.

© Reuters. FILE PHOTO: The logo of German automaker BMW is seen in Brussels, Belgium June 1, 2023. REUTERS/Yves Herman/FILE PHOTO

"We continue to see pressure on BMW and luxury OEM (Original Equipment Manufacturers) EBIT margins from normalising price-mix and higher interest rates," Citi analysts said.

($1 = 0.9148 euros)

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