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BMW says earnings momentum slows on China, rivalry

2016 BMW 7 Series
Source: BMW
2016 BMW 7 Series

BMW second-quarter operating profit eased 3 percent on slowing China sales, leading the carmaker to caution that while it still expects new records for sales and pretax profit in the full year, earnings momentum was slowing.

"The scale of the increase during the forecast period is likely to be held down by fierce competition on automobile markets, rising personnel costs, continued high levels of upfront expenditure to safeguard business viability going forward and upcoming challenges relating to the normalisation of the Chinese market," BMW said in a statement on Tuesday.

Sales in China have been slowing. In May, BMW's and Mini'a China sales fell for the first time in a decade, dropping 4.2 percent, and 0.1 percent in June.

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BMW's earnings before interest and tax fell 3 percent to 2.52 billion euros, exactly in line with the average forecast in a Reuters poll.

BMW's return on sales in its automotive division fell to 8.4 percent, down from 11.7 percent in the year-earlier period and below the 10.7 percent margin reported by rival Mercedes-Benz Cars and the 9.9 percent earned by Audi.

"Weaker performance at Automobiles as well as still cautious statements on China might bode ill for BMW shares today," wrote DZ Bank analyst Michael Punzet, who rates BMW "buy".

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