BMW quarterly profit dips in ‘volatile’ times

BMW’s third-quarter revenues were supported by brisk demand for the group’s vehicles which include the compact Mini and luxury Rolls-Royce. (AFP)
Updated 07 November 2018

BMW quarterly profit dips in ‘volatile’ times

  • Third-quarter revenues were up 4.7 percent to €24.7 billion
  • The group had already issued a rare profit warning in September

FRANKFURT: German high-end carmaker BMW on Wednesday posted a steep drop in quarterly profit as new EU emissions tests, global trade tensions and costly recalls weighed on the bottom line.
The Munich-based group said net profit between July and September slumped 24 percent year-on-year to €1.4 billion ($1.6 billion), falling short of analyst expectations.
Third-quarter revenues were up 4.7 percent to €24.7 billion, supported by brisk demand for the group’s vehicles which include the compact Mini and luxury Rolls-Royce.
The group had already issued a rare profit warning in September when it was forced to lower its full-year outlook in the face of a series of setbacks.
Chief among them was the introduction of tough new EU pollution tests known as WLTP, which sent rival carmakers scrambling to shift non-compliant models before the September 1 deadline.
This resulted in “unexpectedly intense competition,” BMW said.
The group has also been unnerved by US President Donald Trump’s festering trade row with China and his threats to slap steep tariffs on auto imports from the European Union.
“The ongoing international trade conflicts had the effect of aggravating the market situation and feeding consumer uncertainty,” said BMW, which owns factories in Europe, the US and China.
The automaker also felt the pinch from a mass recall of diesel-powered cars over a fire risk in the third quarter, and increased spending on electric and self-driving cars.
“Particularly in these volatile times, we are maintaining our focus on the future and taking the decisions that will lead to tomorrow’s success,” said chief executive Harald Krueger.
BMW confirmed its trimmed outlook for 2018, forecasting revenues from its car business “slightly lower” than last year, rather than the slight increase previously expected.
Group-wide profit before tax “is expected to show a moderate decrease” year-on-year, rather than staying around last year’s level of €10.7 billion.


Analysts urge Canada to focus on boosting the economy

Updated 06 July 2020

Analysts urge Canada to focus on boosting the economy

  • Canada lost one of its coveted triple-A ratings in June when Fitch downgraded it for the first time

TORONTO: Canada should focus on boosting economic growth after getting pummeled by the COVID-19 crisis, analysts say, even as concerns about the sustainability of its debt are growing, with Fitch downgrading the nation’s rating just over a week ago.

Canadian Finance Minister Bill Morneau will deliver a “fiscal snapshot” on Wednesday that will outline the current balance sheet and may give an idea of the money the government is setting aside for the future.

As the economy recovers, some fiscal support measures, which are expected to boost the budget deficit sharply, could be wound down and replaced by incentives meant to get people back to work and measures to boost economic growth, economists said.

“The only solution to these large deficits is growth, so we need a transition to a pro-growth agenda,” said Craig Wright, chief economist at Royal Bank of Canada. The IMF expects Canada’s economy to contract by 8.4 percent this year. Ottawa is already rolling out more than C$150 billion in direct economic aid, including payments to workers impacted by COVID-19.

Further stimulus measures could include a green growth strategy, as well as spending on infrastructure, including smart infrastructure, economists said. Smart infrastructure makes use of digital technology.

“We have to make sure that government spending is calibrated to the economy of the future rather than the economy of the past,” Wright said.

Canada lost one of its coveted triple-A ratings in June when Fitch downgraded it for the first time, citing the billions of dollars in emergency aid Ottawa has spent to help bridge the downturn caused by COVID-19 shutdowns.

Standard & Poor’s, Moody’s and DBRS still give Canadian debt the highest rating. At DBRS, Michael Heydt, the lead sovereign analyst on Canada, says his concern is about potential structural damage to the economy if the slowdown lingers too long.

Fiscal policymakers “need to be confident that there is a recovery underway before they start talking about (debt) consolidation,” Heydt said.

Fitch expects Canada’s total government debt will rise to 115.1 percent of GDP in 2020 from 88.3 percent in 2019.

Royce Mendes, a senior economist at CIBC Capital Markets, said the economy still needs more support.

“Turning too quickly toward austerity would be a clear mistake,” he said.