BMW startled investors when it announced it has increased its profit prediction for 2021 from its previous expectation of a 7 to 9% objective to between 9.5% and 10.5%, claiming improved sales of its high-margin vehicles more than made up for any issues with semiconductor supply.
In a research report, Bernstein Research analyst Arndt Ellinghorst stated that “BMW reaffirms that the company is well on pace to achieve excellent profitability for the second half of this year and more critically for 2022.”
“BMW raises the range of its forecast for the Automotive Segment’s EBIT (earnings before interest and taxes) margin from 7% to 9% to 9.5% to 10.5% for the fiscal year 2021. In addition, the range of expectations for Return on Equity for the Financial Services Segment is now between 20% and 23% rather than between 17% and 20% “The business declared in a statement.
BMW anticipates that the ongoing favorable pricing effects for both new and pre-owned vehicles will more than make up for these negative sales volume effects in the current financial year, according to the statement. “Whilst the semiconductor supply restrictions are expected to further impact production and deliveries to customers in the coming months,” it said.
BMW increased their profit expectation back in August from the initial 6% to 8% forecast to between 7% and 9%. Investors were concerned about its resolve to pursue an electric vehicle policy that also provides place for conventional internal combustion engines (ICE), presumably fuel cells, at the time, despite the company’s assertion that its bottom line outlook was positive.
BMW joins other automakers in warning about the Ukraine crisis
- The crisis in Ukraine has caused BMW to decrease its profit margin projections for its automotive division for 2022, the German automaker said on Wednesday.
- Due to the consequences of the war on production, BMW Group currently anticipates growth in earnings before interest and taxation (EBIT) in its automobile segment in a range of 7-9%.
The latest automaker to issue a warning about issues with continued chip shortages and further supply chain interruptions brought on by Russia’s invasion of Ukraine, BMW lowered its 2022 profit margin prediction for its car business on Wednesday.
Due to the impact of the developing Ukraine situation, BMW Group said it now anticipates an earnings before interest and taxation (EBIT) margin for its automotive division of 7-9% rather than 8-10%.
Automakers from Toyota to Tesla have been forced to close plants and boost prices as a result of Russia’s invasion of Ukraine and COVID-19-related disruptions in China. Many have also issued warnings about potential adjustments if the situation does not improve.
Even though it was still able to acquire some parts from western Ukraine and was working with suppliers around the world to maintain production, BMW warned that more pauses in service were to be anticipated in the coming weeks.
The German automaker had a 10.3% EBIT margin for 2021, which was its highest since 2017. Despite semiconductor shortages, the company sold a record 2.52 million cars last year.
According to the company, it had anticipated delivering an even greater number of vehicles this year, but now anticipates being on pace with 2021.
BMW claimed that because of the conflict in Ukraine, it was difficult to provide precise guidance for 2022 and that it was unable to account for any potential long-term effects in its prediction.
The automaker said it anticipates a considerable increase in pre-tax profit for the current year as a result of the full consolidation of BMW Brilliance in China, which more than quadrupled pre-pandemic earnings in 2021 to 16 billion euros ($17.67 billion).
Due to growing raw material costs, Tesla increased pricing twice in a single week, while Volkswagen issued a warning that its outlook may be altered within a month if it did not secure alternative suppliers for wire harnesses that were formerly produced in Ukraine.
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Even though the conflict in the Ukraine and a global shortage of semiconductors have a negative impact on production, BMW AG predicted operational returns for its automotive division will remain strong this year.
On Wednesday, the business revised its forecast for 2022 automaking returns to 7% to 9%, stating that the target range would have been 8% to 10% but for Russia’s invasion. BMW anticipates flat deliveries of roughly 2.5 million.