BMW plans massive cost cuts to keep profits from sputtering

BMW’s total number of employees is set to remain flat at around 135,000 worldwide, and new recruits would be IT specialists. (AFP)
Updated 20 March 2019

BMW plans massive cost cuts to keep profits from sputtering

  • ‘Our business model must remain a profitable one in the digital era,’ chief executive Harald Krueger said
  • Total number of employees is set to remain flat at around 135,000 worldwide

MUNICH: German high-end carmaker BMW warned Wednesday it expects pre-tax profits “well below” 2018 levels this year as it announced a massive cost-cutting scheme aimed at saving $13.6 billion (€12 billion) in total by 2022.
A spokesman said that “well below” could indicate a tumble of more than 10 percent.
The Munich-based group’s 2019 result will be burdened with massive investments needed for the transition to electric cars, exchange rate headwinds and rising raw materials prices, it said in a statement.
Meanwhile it must pump more cash into measures to meet strict European carbon dioxide (CO2) emissions limits set to bite from next year.
And a one-off windfall in 2018’s results will create a negative comparison, even though pre-tax profits already fell 8.1 percent last year.
Bosses expect a “slight increase” in sales of BMW and Mini cars, with a slightly fatter operating margin that will nevertheless fall short of their 8.0-percent target.
“We will continue to implement forcefully the necessary measures for growth, continuing performance increases and efficiency,” finance director Nicolas Peter said at the group’s annual press conference.
BMW aims to achieve €12 billion of savings in the coming years through “efficiency improvements” including reducing the complexity of its range.
“Our business model must remain a profitable one in the digital era,” chief executive Harald Krueger said.
This year, most new recruits at the group will be IT specialists, while the total number of employees is set to remain flat at around 135,000 worldwide.
Departures from the sizeable fraction of the workforce born during the post-World War II baby boom and now reaching retirement age “will allow us to adapt the business even more to future topics,” BMW said.
All the firm’s forecasts are based on London and Brussels reaching a deal for an orderly Brexit and the United States foregoing new import taxes on European cars.
“Developments in tariffs” remain “a significant factor of uncertainty” in looking to the future, finance chief Peter said, adding that “the preparations for the UK’s exit from the EU will weigh on 2019’s results as well.”
In annual results released ahead of schedule last Friday, BMW blamed trade headwinds and new EU emissions tests for net profits tumbling 16.9 percent in 2018, to €7.2 billion.


Saudi investors get chance to buy Amlak International shares

Updated 4 min 1 sec ago

Saudi investors get chance to buy Amlak International shares

RIYADH: Amlak International shares went on sale to the Saudi public on Thursday in what is the Kingdom’s first initial public offering since the coronavirus crisis.
The Saudi real estate finance company started the second phase of its share sale to retail investors after the institutional offering was oversubscribed.
It is offering about 2.7 million shares to individual subscribers at a price of SR16 ($4.27) per share.
This public offering represents almost 10 percent of the 27.18 million shares Amlak has decided to float, which accounts for 30 percent of its capital valued at SR906 million.
Individual buyers can purchase at least 10 shares and at most 1 million shares through the receiving agents, the Saudi Investment Bank, National Commercial Bank, Al Rajhi Bank and Bank Al Jazira, Amlak said.
The company said the public sale would run to July 5 and any surplus would be refunded on July 14.
Amlak International’s IPO is the first in the GCC region after the outbreak of coronavirus. Abdullah Al-Sudairy, Amlak’s CEO, said in an earlier interview with Arab News that the IPO represented a vote of confidence in the long-term fundamentals of the business and the whole economy.
“Amlak was widely rumored to be considering the market initiative earlier this year before the pandemic broke on the world. That put the plans on hold for a while, but the decision to go ahead with it now represents a vote of confidence in the business, in the fundamentals of the Saudi economy, and in the Kingdom’s financial markets” he said.
Despite a seemingly unfavorable global economic backdrop, investor interest in the Saudi mortgage remains strong following a government initiative to boost home ownership in the Kingdom.
Under the Vision 2030 blueprint for economic and social reform, the government aims to boost home ownership for citizens to 70 percent by 2030 and to raise the total of mortgage loans to SR502 billion by the end of next year from SR290 billion, which represents a jump of 73 percent.
Still the coronavirus pandemic may impact the growth of the mortgage market in the Kingdom.
“In the short-term, COVID-19 and declining oil prices are expected to have an impact on the pace of construction and demand for housing, reflecting sluggish activity,” Deloitte said in a report on the Saudi mortgage market published in May.