BMW results lower than expectations

German carmaker BMW saw its shares fall 10% this morning after it warned that deteriorating business conditions means it will not hit its targets for this year.

BMW, which is an acronym for Bayerische Motoren Werke, posted profits before tax of €602 million euros (£474 million, $937 million) in the second quarter, this is 43.5% lower compared with the same period in last year.

Net income fell to €507 million compared with €753 million a year earlier, while sales fell to €14.6 billion from €14.7 billion.

The world’s largest maker of luxury vehicles also said its profits have been hit by one-off charges after it made a €695 million provision to cover financial risk. In addition, it spent €107 million on reducing headcount.

The news from BMW follows that from Daimler, who last week said it will cut its earnings guidance for the year.

Following the news from BMW, shares also fell in other European carmakers including Volkswagen, who lost 3.1%, while Renault was down 3.4%.

A spokesperson for BMW said business conditions for the automobile industry deteriorated significantly again for the three month period to the end of June. This was mainly due to the weakness of the US dollar and soaring costs in oil and raw material prices.

The company added that it was not hopeful about the outlook for next year and said it is expecting next year to be challenging.

In related news, French car maker Renault confirmed last week it is to reduce its European workforce by 5,000 through voluntary redundancies. Renault blamed the deteriorating economic outlook.

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