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BMW earns fall 28 percent

Published: August 1, 2012 | 7:29 am
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FRANKFURT, Germany (AP) — German luxury automaker BMW AG says earnings fell 28 percent in the second quarter due to higher costs for investments in new technology and personnel. A large one-time plus from the same quarter a year ago affected the comparison.

Despite the fall in profit, the company recorded record sales, held onto its outlook and maintained its high profit margins on automobile sales.

However it cited “intense market competition” and warned that any worsening of Europe’s economic crisis or a growth slowdown in China could hurt its business in the months ahead. It is already facing headwinds from Europe’s crisis over too much government debt in some countries, which has devastated economies in nations such as Spain and Greece and kept Europe sales flat from the year before.

Net profit fell to €1.28 billion ($1.57 billion) from €1.77 billion a year ago. Sales rose 7 percent to €19.2 billion. The fall in net profit in part results from €464 million in one-time pluses from the year-ago quarter, which also saw record profits that made it harder for BMW to equal the previous year figure.

BMW said “higher personnel costs, increased expenditure on development and new technologies, intense market competition and the higher baseline of the previous year’s record second-quarter earnings all contributed to the lower earnings figures in 2012.”

The company reported record sales of 475,000 vehicles and said its profit margins remained at a strong 11.6 percent on car sales. That’s a key figure indicating the company is maintaining its ability to generate strong profits from sales.

Earnings were supported by continuing sales increases in China, where they rose 31 percent, and by a 10 percent increase in the U.S. Strong global sales of the X3 sport utility, which jumped 38 percent, helped profits.

“The BMW Group continued to perform extremely well,” CEO Norbert Reithofer said in a statement.

The company, which has invested in electric cars and the use of high-tech carbon fiber parts, said it had increased technology and development costs and cited investments in its production network. It also has 5 percent more workers, at 102,000, than it did in the quarter last year.

The company’s earnings fell short of the consensus estimate for €1.38 bill compiled by FactSet. It held onto its earnings prediction for the year of exceeding last year’s sales volume and pre-tax earnings, but said those forecasts are “based on the assumption that worldwide economic conditions will not deteriorate sharply. The BMW Group sees risks primarily in a further deterioration of the economic situation in Europe and a slowdown of growth in China.”

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