BMW confirms 2012 targets but feels headwind

BMW, the world’s largest premium carmaker, posted a third-quarter gain in underlying profits that be at ex pectations and reaffirmed it expected to earn more money before tax than ever before this year. Thanks to rampant demand in China, BMW’s single largest market, earnings before interest and tax (EBIT) rose 13.8 percent to 2.00 billion euros ($2.56 billion) in the quarter, exceeding the 1.72 billion euros expected in a Reuters poll.

Earnings down the income statement surprised on the upside thanks to top line growth that surpassed market estimates by over 1 billion euros, but BMW’s chief executive warned of weakening conditions that could explain squeezed margins. “Like the rest of the sector, we are now beginning to feel some headwind,” CEO Norbert Reithofer said in a statement.

Once considered nearly invulnerable to the crisis buffeting other European auto makers thanks to factories running flat out to meet surging demand in China and the United States, German premium carmakers’ monolithic facade is beginning to reveal cracks.

Daimler’s Mercedes luxury car business warned it  would fall nearly 800 million euros short of its earnings target this year and delayed plans to reach a 10 percent operating profit margin by 2013. By comparison, BMW has so far been able to coast off its younger and more diversified product range as well as its fast growing China business.

BMW’s core Automobiles business reported the quarterly EBIT margin – a key industry benchmark – had narrowed to just 9.6 percent versus 11.9 percent a year ago and below expectations of 9.9 percent. The cars division generated some 1.35 billion in cash in the third quarter, giving it a liquidity cushion of about 13.0 billion by the end of September.

BMW new 3 series, to be launched February 2013