BMW cuts 2022 profit margin forecast as Ukraine war disrupts production
BMW Group (BMW.DE) has lowered its profit margin expectations for its automotive segment for 2022 as the war in Ukraine impacts supply chains.
BMW now predicts its earnings before interest and taxation margin in its car segment in a range of 7-9% due to the war's effects on production. Without the impact of war, the company would have targeted a range of 8-10%, it said.
BMW said production interruptions should continue to be expected due to the war, although it is able to continue to source parts from western Ukraine.
The company is “engaging in intense and constructive discussions with its partners and suppliers and leveraging the high level of flexibility in its production network to minimise these limitations.”
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The German carmaker said its latest guidance assumes that the impact of the geopolitical situation in eastern Europe will lead to restrictions in the BMW Group production network “over the coming weeks”.
The company warned that the war in Ukraine made it difficult to give accurate guidance for 2022 and that it could not factor any potential long-term implications of the war into its forecast.
BMW said the safety of local employees remains the top priority.
“In the current situation, three things are paramount for the BMW Group: helping the victims and those affected wherever we can, securing our day-to-day operations worldwide and continuing to systematically implement our long-term strategy,” BMW CEO, Oliver Zipse, said.
“The major challenges we are already facing, such as the fight against climate change and the transformation towards sustainable mobility, must still be confronted with the same intensity. It is especially important in times of crisis not to stop doing the right things.”
The company also said it does not see the semiconductor shortage improving until the second half of the year.
The luxury carmaker, which sold a record 2.52 million vehicles last year, reported a 10.3% earnings margin for 2021, its highest since 2017. It more than doubled pre-pandemic earnings in 2021 to €16bn (£13.45bn/ $17.67bn).
Overall earnings for BMW, including its finance and motorcycle segments, should increase significantly this year, the company said, helped by the full consolidation of its Chinese BMW Brilliance joint venture.
By 2025, the company plans to sell around a quarter of its vehicles entirely online. BMW also said it plans to add new jobs worldwide this year that will expand its workforce by to up to 5%.
Read more: Electric cars gain market share but chip shortage cuts UK auto sales by 25%
BMW said it expects 15 fully electric models to be in production this year, including the rollout of the new i7 sedan. The company also said it is developing new battery technology and could deliver early on its target of having fully battery-powered vehicles making up half its global sales by 2030.
Employees will see an increase in their profit-sharing bonus for 2021, in line with the group’s net profit.
BMW is proposing a dividend of €5.80 per share of common stock and €5.82 per preferred stock for the financial year 2021. This represents a payout ratio of 30.7%.
