Luxury automaker BMW sees operating earns rise, net profit falls on financial factors

FRANKFURT – Germany’s luxury automaker BMW AG saw net profit slip 1.2 per cent in the third quarter due to non-cash losses on foreign currency hedges and the reduced value of a stake in a key supplier.

The company otherwise had a profitable quarter, riding strong sales of its expensive X5 sport-utility made in Spartanburg, South Carolina. Other measures of earnings rose and the company on Tuesday affirmed its forecast for increased profits this year.

Net profit of 1.31 billion euros ($1.64 billion) for the third quarter ending Sept. 30 fell short of analyst expectations for 1.36 billion euros, as compiled by financial information provider FactSet.

But operating earnings — which exclude financial items like the stake revaluation and the currency hedges — rose 17.1 per cent to 2.25 billion euros, excluding interest and taxes. Revenues rose 4.5 per cent to 19.6 billion, as the company sold 509,669 cars worldwide, an increase of 5.8 per cent.

Crucially, BMW showed an increase in its profit margin to 9.4 per cent from 9.0 per cent across its model lineup — a key figure for investors and an indication the company is reaping the benefits of its focus on the higher-priced end of the car market.

The Munich-based company has seen a 3.4 per cent increase in sales of its mainstay 3-Series sedan over the first nine months of the year. And it saw a sharp increase in demand for the X5, which sells for $52,800-$68,200 in the U.S. and brings fatter profits per vehicle than more modestly priced cars.

A tax bill that was 40 million euros higher than last year was one factor reducing net profit. The company said it also took a charge for the reduced value of its stake in SGL Carbon, maker of advanced carbon-fiber materials used to cut vehicle weight in BMW’s i3 and i8 models. And it saw a further non-cash charge for losses on foreign currency hedges intended to shield revenues from exchange rate fluctuations.

BMW shares fell 1 per cent to 84.22 euros.