The BMW Group posted a 19-percent drop in earnings before interest and taxes for the second quarter of 2012 to EUR2.27 billion from EUR2.8 billion in the same period in 2011. The company, however, logged a 7.3-percent increase in sales to EUR19.2 billion. The company’s carmaking division posted a 16-percent dive in EBIT to EUR2.02 billion, with the margin at 11.6 percent of sales.
BMW has similar margins with Volkswagen's Audi division, while Daimler's Mercedes-Benz has margins of 8.6 percent. While the European market continues to be sluggish, BMW also pointed out the "intense market competition," referring to increasing incentive levels.
According to David Arnold and Arndt Ellinghorst, analysts at Credit Suisse Group, the German luxury carmaker is probably struggling with "increasingly unfavorable" car pricing. BMW chief executive Norbert Reithofer said in a statement that they are monitoring developments in various markets very closely. He added that the BMW group has a flexible production network, and that the premium car manufacturer is focused on maintaining profitable growth.
BMW is expected to have gained from the weakening euro, being the German luxury carmaker with the biggest exposure to exchange rate fluctuations. According to S&P Equity Research analyst Marnie Cohen, they expect a “solid tailwind” for BMW in 2012-2013, with the luxury carmaker having around EUR11.4 billion in 2012 net transaction exposure to US dollar/renminbi on estimates.
Rivals Mercedes-Benz and Audi also benefited from the weakening euro, posting EUR317 million and EUR300-400 million gains related to foreign exchange effects.