BMW posts steep drop in profit as global trade ten­sions weigh on bot­tom line

Gulf Times Business - - BUSINESS -

Ger­man high-end car­maker BMW yes­ter­day posted a steep drop in quar­terly profit as new 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% year-on-year to €1.4bn ($1.6bn), fall­ing short of an­a­lyst ex­pec­ta­tions. Third-quar­ter rev­enues rose 4.7% to €24.7bn, 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 emis­sions tests known as WLTP, which sent ri­val car­mak­ers scram­bling to shift non-com­pli­ant mod­els be­fore the Septem­ber 1 dead­line with con­sid­er­able dis­counts of­fered to buy­ers. This re­sulted in “un­ex­pect­edly in­tense com­pe­ti­tion”, BMW said. The group has also been im­pacted by US Pres­i­dent Don­ald Trump’s fes­ter­ing trade row with China, which has seen both sides im­pose tit-for-tat tar­iffs, and his threats to place steep du­ties 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 like­wise felt the pinch from a mass re­call of diesel-pow­ered cars over a fire risk, for which it had to set aside €679mn in the third quar­ter.

ABN Amro

Dutch len­der ABN Amro aims to in­crease div­i­dend pay­outs to more than half of its net prof­its af­ter strong eco­nomic growth in its do­mes­tic mar­ket pushed up earn­ings in the third quar­ter. A higher div­i­dend would ben­e­fit the Dutch gov­ern­ment which re­mains the bank’s largest share­holder af­ter a bailout a decade ago. ABN Amro re­turned to the stock mar­ket in 2015 but the state re­tains 56% of the shares and hasn’t sold any in over a year.

Net profit in the lat­est quar­ter was €725mn ($830mn), com­pared with €673mn a year ear­lier and €589mn ex­pected by an­a­lysts in a Reuters poll. This put ABN on track to meet its ear­lier prom­ise of in­creas­ing share­holder pay­outs, while keep­ing its cap­i­tal buf­fers well above min­i­mally re­quired lev­els. ABN Amro has set aside 60% of its net profit over the first nine months of the year for div­i­dends, as it aims to in­crease the pay­out to share­hold­ers from the 50% ra­tio reached last year, it said yes­ter­day.

“This 60% is an indi­ca­tion of the di­rec­tion of our think­ing”, CFO Clif­ford Abra­hams told re­porters.

Credit Agri­cole

Credit Agri­cole is on track to meet its fi­nan­cial tar­gets af­ter it re­ported higher third-quar­ter prof­its, the French bank’s chief ex­ec­u­tive said yes­ter­day. Net profit rose 3.2% to €1.10bn ($1.26bn) top­ping the €1.03bn ex­pected by an­a­lysts in a poll by In­quiry Fi­nance for Reuters.

Rev­enue rose 5% to €4.80bn, short of the €4.86bn ex­pected by an­a­lysts.

“The re­sults are se­ri­ous and the fruit of our struc­tural pru­dence,” chief ex­ec­u­tive Philippe Bras­sac told re­porters. He said the bank had al­ready met some of its fi­nan­cial tar­gets for 2019 and was on track to meet the oth­ers.

Ke­pler Cheuvreux an­a­lysts ex­pect Credit Agri­cole to reach its 2019 net profit tar­get this year. Mon­taigne Cap­i­tal fund man­ager Pierre Wil­lot, whose port­fo­lio does not in­clude Credit Agri­cole shares, said the bank’s re­sults had been flat­tered by a drop in pro­vi­sions.

Mu­nich Re

Ger­man rein­surer Mu­nich Re re­turned to profit in the third quar­ter and af­firmed its guid­ance for 2018, re­cov­er­ing from a spate of nat­u­ral catas­tro­phes a year ago.

Net profit came to €483mn ($553mn), it said yes­ter­day, com­pared with a €1.44bn loss in the yearear­lier pe­riod and an­a­lyst con­sen­sus for a €456mn profit. “This good Q3 re­sult puts us on track to achieve our profit tar­get for 2018 - de­spite a series of ma­jor nat­u­ral catas­tro­phes still con­tin­u­ing in the fourth quar­ter,” Chief Fi­nan­cial Of­fi­cer Jo­erg Sch­nei­der said. Mu­nich Re aims to post a 2018 full-year profit of €2.1bn to €2.5bn. The group’s re­turn to profit came de­spite a series of nat­u­ral catas­tro­phes in the third quar­ter, in­clud­ing Hur­ri­cane Florence in the United States and Typhoon Jebi in Ja­pan.

CBA

Com­mon­wealth Bank of Aus­tralia, the coun­try’s big­gest len­der by as­sets and mar­ket value, posted a 5.7% fall in first-quar­ter cash profit on slow­ing loans growth and higher fund­ing costs.

The unau­dited re­sult comes as Chief Ex­ec­u­tive Matt Comyn is to be ques­tioned later this month at a pow­er­ful mis­con­duct in­quiry that has ex­posed fail­ings in Aus­tralia’s bank­ing sec­tor, dam­ag­ing CBA’s brand and cost­ing it hun­dreds of mil­lions of dol­lars in re­me­di­a­tion charges and le­gal ex­penses. Cash profit, a mea­sure that ex­cludes one-off and non-cash ac­count­ing items, fell to A$2.50bn ($1.81bn) for the three months ended Septem­ber 30, the bank said in a lim­ited trad­ing up­date yes­ter­day. That com­pares with A$2.65bn a year ago that in­cluded prof­its from its life in­sur­ance unit. Those prof­its have been ex­cluded in the lat­est quar­ter be­cause the unit is be­ing sold.

The profit fall came as higher short-term in­ter­est rates im­pacted net in­ter­est mar­gins, a key gauge of bank prof­itabil­ity that CBA did not quan­tify. Com­pared to the av­er­age cash profit in the pre­vi­ous half, earn­ings were 3% higher.

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