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Rebounding markets boost BMW’s third-quarter cash flow

Jill Petzinger
·Germany Correspondent, Yahoo Finance UK
Updated ·2-min read
11 June 2020, Saxony, Leipzig: At the end of the production line, an employee walks over the last BMW i8 with a cloth. Six years after its market launch, the last plug-in hybrid sports car has rolled off the assembly line here. A total of 20 488 of these cars were produced at the Leipzig plant. This makes the hybrid sports car with electric and gasoline engines by far the best-selling sports car at BMW. The vehicle with a passenger cell made of carbon-reinforced plastic (CFRP) won numerous awards. In addition to vehicles with combustion engines, BMW also builds the electric model i3 in Leipzig. Photo: Jan Woitas/dpa-Zentralbild/dpa (Photo by Jan Woitas/picture alliance via Getty Images)
The last BMW i8 plug-in hybrid sports car rolled off the assembly line in Leipzig on 11 June. Photo: Jan Woitas/Picture Alliance via Getty Images

BMW (BMW.DE) on Monday evening reported that it had a much higher free cash flow than expected in the third quarter of this year.

In a preliminary release, ahead of its third-quarter earnings report on 4 November, the German luxury carmaker said that its free cash flow came to €3.07bn (£2.8bn, $3.6bn) compared with €714m in the same quarter of 2019.

The carmaker said in a statement that “this was due in particular to faster recovery in several markets, which led to higher sales growth.”

It also attributed the higher cash flow to reduction in fixed costs and capital expenditure, and optimisation of working capital, but noted that its earnings forecasts for the group are unchanged.

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Watch: What is a V-shaped economic recovery?

COVID-19 is making future predictions tough, BMW noted. “Economic disruption caused by the coronavirus pandemic continues to significantly impair forecasting and leads therefore to considerable uncertainty in providing an accurate outlook,” it said in its statement.

While the automotive industry was brought to a standstill in the first and second quarters due to COVID-19 lockdowns and a collapse in consumer demand, there are signs that things are starting to slowly pick up again.

BMW rival Daimler (DAI.DE) last week reported a rebound in the third quarter, with strong cash flow boosted by a growth in September sales. Its operating profit (EBIT) surged by 14% to over €3bn in the three months ending September.

Like BMW, Daimler is on a drive to reduce costs and restructure. The Mercedes-Benz maker said in July that it will need to cut more than 15,000 jobs.

The European car market saw its first monthly increase in new car registrations in September. According to data from the European Automobile Manufacturers Association, new car registrations were up by 3.1% last month, led by a rebound in Italy and Germany. However, over the nine months of the year to date, demand shrunk by almost 29% compared with the same period in 2019.

Watch: What is a no-deal Brexit?