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CONSUMER CYCLICALS: BMW (BMW A2/A/NR): Profit Warning

CONSUMER CYCLICALS

The latest blow to a beleaguered sector. Negative for spreads, we see up to 12 wider so far. Negative read for the sector, particularly China exposed VW.

  • BMW lowers its FY24 guidance. Although issues with the braking system are being put out front here, slowing Chinese and motorcycle demand are also factors. It had previously expected China to stabilise in 3Q.
  • Continental supplies the brake system and assumes a small proportion of systems will need replacing. 1.5 million vehicles will be recalled, with delays to new car deliveries as well. BMW expects high three-digit millions warranty costs in 3Q.
  • BMW is now guiding automotive for a slight decrease in deliveries YoY from a slight increase. It sees 6-7% EBIT margin, down from 8-10%. It sees flat deliveries in motorcycles from a slight increase with EBIT margin seen at 6-7% down from 8-10% with pricing as well as volume impacting.
  • Automotive FCF will be impacted by the inventory buildup. €4bn is now expected, down from €6bn previously.
  • BMW will remain net cash for the year but ratios are deteriorated on this.

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