BERLIN -- BMW AG said Tuesday that third-quarter net profit slumped 74% from a year earlier, but that it expects to remain profitable in 2009 and anticipates a steady market improvement next year.
The Munich-based auto maker reported net profit fell to €78 million from €298 million in the same period a year ago, reflecting a steep fall in demand for luxury cars amid the recession. The results came in slightly below analysts' estimates of €94 million.
Revenue slumped 6.6% to €11.8 billion from €12.6 billion, while the company's closely watched earnings before interest and tax, or EBIT, contracted 86% to €55 million from €387 million on a year-to-year basis.
BMW Chief Executive Norbert Reithofer said in a statement that the company expects markets to make a gradual recovery over the coming year.
"The BMW X1 and BMW 5 Series Gran Turismo should provide good momentum. This trend will be fuelled further between 2010 and 2012 when the new versions of high-selling models come onto the markets," Mr. Reithofer said. The CEO added that BMW still targets a return on sales in its auto segment of between 8% and 10% in 2012 and a return on capital employed of more than 26%.
The optimistic outlook wasn't sufficient to counter investors' disappointment with the earnings figures. BMW shares recently traded down 6.8% at €31.30, while the blue-chip DAX index traded down 1.4%.
The company's shares have gained around 20% in value over the past six months, outperforming a 4% rise of the Dow Jones Stoxx Europe 600 automotive and parts sector index, as investors expect premium auto makers to be hurt less by an anticipated slump in demand after state-backed scrapping incentives in many markets expire. These scrapping incentives mainly revived demand for smaller cars rather than big luxury sedans.
BMW said third-quarter sales declined 7.2% on the year to 324,100 vehicles. The company confirmed that it expects vehicle sales this year to decline by between 10% and 15% compared with 2008. BMW sold around 1.43 million vehicles last year.
"It is still too early to give the all-clear for the world's automobile markets," CEO Reithofer said.
BMW was particularly hard hit when demand for premium cars came to a grinding halt amid the economic downturn due to its large footprint in the U.S., which until recently was the company's largest sales region ahead of its domestic market.
But the world's biggest luxury car maker by sales managed successful damage control as it scaled back production earlier than many other auto makers when markets collapsed and kept cash burn at a relatively modest level. Additionally, BMW initiated a wide-ranging program to trim costs and improve efficiency.
BMW plans to exceed its initial target of €4 billion of material cost reductions by 2012 as part of a wide-ranging cost-cutting target of €6 billion. Reducing expenses in materials, production and development are expected to account for two-thirds of the planned overall cost reduction.
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