BMW earnings hit by 5 Series ramp-up costs, leasing

PARIS/FRANKFURT: Startup costs for BMW's new 5 Series model contributed to lower-than-expected 2016 operating earnings at the German luxury carmaker, which knocked its shares on Thursday.

BMW, whose namesake brand ceded the luxury sales crown to Mercedes-Benz last year, said accounting changes partly reflecting leased vehicle resale values also weighed on profit in the fourth quarter.

Munich-based BMW's earnings before interest and tax (EBIT) fell 2.2 percent to 9.39 billion euros ($9.91 billion) even as its revenue rose 2.2 percent to a record 94.163 billion euros.

The results missed forecasts by analysts, who had expected EBIT of 9.89 billion euros on 95.15 billion in revenue, based on the median of 17 estimates in a Reuters poll.

Shares in the maker of BMW, Mini and Rolls-Royce cars fell as much as 4.2 percent and were 3.5 percent lower at 83.6 euros at 1251 GMT.

"It's a miss on group numbers," Evercore ISI analyst Arndt Ellinghorst told Reuters.

Ellinghorst voiced surprise at the extent of negative adjustments that included estimated resale values for leased vehicles. Those were in addition to 498 million euros of "eliminations" from fourth-quarter profit.

The numbers show "a lot of residual value pressure or conservatism", he said, adding that automakers typically anticipate lower resale values as markets peak.

BMW declined to comment further before it publishes 2016 earnings in more detail on March 21. But a spokesman referred the company's earlier warning that the 5 Series production ramp-up would lead to higher fourth-quarter costs.

"We expect this to have a dampening effect on earnings," then Chief Financial Officer Friedrich Eichiner said on Nov. 4.

BMW in investing heavily to develop an extensive lineup of electrified, connected and later self-driving cars.

"From 2019 onwards, we will be firmly embedding all-electric, battery-powered mobility in our core brands," Chief Executive Harald Krueger said on Thursday.

The core automotive division operating margin fell to 8.9 percent last year from 9.2 percent, the group said in its statement, while predicting another sales volume record in 2017.

The luxury carmaker also raised its proposed dividend to 3.50 euros per share from the 3.22 euros paid last year, exceeding the 3.38 euros expected by analysts.