March 18, 2020 / 8:14 AM / 23 days ago

BMW says pretax profit to be significantly lower in 2020

FILE PHOTO: A person wipes a BMW car on display at the LA Auto Show in Los Angeles, California, U.S., November 20, 2019. REUTERS/Lucy Nicholson

FRANKFURT (Reuters) - BMW (BMWG.DE) said its pretax profit and vehicle deliveries will drop significantly this year as coronavirus spreads, and combined with higher research and development spending this will lower the profit margin in its automotive segment.

The Munich-based carmaker said it is preparing to suspend production at its plants in Rosslyn, South Africa and in Europe until April 19, responding to lower demand and as a way to help reduce risk of contagion. The plant shutdown will start at the end of the week.

BMW said the current uncertainty regarding the global spread and effects of coronavirus makes it difficult to provide an accurate forecast for 2020 but it expected lower delivery volumes in all major markets in 2020.

“Group profit before tax is expected to be significantly lower than in 2019, BMW said in a statement on Wednesday.

Based on the latest forecast, the EBIT margin of the Automotive segment is therefore expected to lie within a range of between 2% and 4%, it said.

BMW said it will invest 30 billion euros on research and development until 2025 so it can bring next-generation electric and hybrid vehicles to market.

The next BMW 7-series will be available as a fully electric car, the carmaker said.

Earlier this month, BMW said higher research and development spending and manufacturing costs had caused earnings before interest and tax (EBIT) to drop 17% to 7.411 billion euros ($8.26 billion) in 2019.

As a result, the operating margin in its automotive division fell to 4.9% last year, from 7.2% in 2018.

Reporting by Edward Taylor; Editing by Michelle Martin and Elaine Hardcastle

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