Bmw posted a huge jump in second-quarter profit thanks to U.S. and China

Article by Christian Andrei, on August 1, 2011

BMW AG reported a huge jump in second-quarter profit, thanks to the rebounding U.S. spending and the growing wealth in China that contributed to the increase in the demand for premium vehicles. Specifically, the company recorded 2.86 billion euros ($4.1 billion) in earnings before interest and taxes for the second quarter this year from 1.72 billion euros on the same period last year.

The profit outperformed the average estimate of 2.3 billion euro made by 17 analysts as compiled by Bloomberg. Revenue increased 17 percent to 17.9 billion euros.

On July 12, BMW increased its estimates profit and sales forecasts for 2011, citing strong demand in the vehicle markets all over the world. The company, which produces the core brands Mini, BMW and Rolls-Royce, emphasized that EBIT at its vehicle division will exceed 10 percent of revenue in 2011.

According to CEO Norbert Reithofer in a statement, strong demand for Mini, BMW and Rolls-Royce brands all over the world, together with efficiency improvements in all areas of the company, greatly contributed to the “outstanding performance."

The company achieved the highest profit margins among the top three manufacturers of premium vehicles. The company's auto division posted EBIT equal to 14.4 percent of sales, outperforming a 10.7 percent at Mercedes-Benz brand and an 11.8 percent margin at Audi unit. BMW forecasts that its sales will increase to at least 1.6 million vehicles, versus an earlier estimate of 1.5 million.

However, the company revealed that the rates of growth will slow in the second half due to changes in its lineup. The company will launch an overhauled variant of the 1 series compact in September in an effort to outperform the A3 of Audi.

Vehicle model introductions will contribute about 500 million euros to expenses in the last half of the year, Friedrich Eichiner, the company’s chief financial officer, stated last May 4.

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