Research Update: BMW Outlook Revised To Negative On Weakened Profitability And Cash Generation; 'A+/A-1' Ratings Affirmed

Germany-based automaker BMW AG reported automotive free operating cash flow (FOCF) of about €1 billion in the first nine months of 2019, down from about €2 billion a year earlier. The decline was due to lower earnings (excluding the €1.4 billion provision booked for antitrust allegations that did not lead to a cash out in 2019), a substantial increase in inventories, and continued high investments. In a competitive market, BMW's cost reduction measures might not be sufficient to bring profitability back to the targeted 8%-10% operating margin corridor over the next two years. We are revising our outlook on BMW to negative from stable and are affirming our 'A+/A-1' ratings on the company. The negative outlook reflects the risk that

...- Germany-based automaker BMW AG reported automotive free operating cash flow (FOCF) of about 1 billion in the first nine months of 2019, down from about 2 billion a year earlier. The decline was due to lower earnings (excluding the 1.4 billion provision booked for antitrust allegations that did not lead to a cash out in 2019), a substantial increase in inventories, and continued high investments. - In a competitive market, BMW's cost reduction measures might not be sufficient to bring profitability back to the targeted 8%-10% operating margin corridor over the next two years. - We are revising our outlook on BMW to negative from stable and are affirming our 'A+/A-1' ratings on the company. - The negative outlook reflects the risk that BMW will be unable to return to its targeted 3 billion automotive FOCF over the next two years, given numerous headwinds that could continue to weigh on the group's operating profit margin. For the current rating, we would expect BMW to generate at least...

Research Update