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Bayerische Motoren Werke : BMW Shares Fall Despite Record Profits on Concerns Over Future -- Update

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03/09/2016 | 12:30pm EDT
By William Boston 

FRANKFURT--Shares in BMW AG fell nearly 2% on Wednesday despite record profits after the German premium car maker announced a lower-than-expected dividend and investors become concerned over the company's growth.

Net profit in 2015 rose 10% to EUR6.4 billion ($7.05 billion), compared with EUR5.8 billion a year earlier. Revenue increased 15% to EUR92.2 billion from EUR80.4 billion, helped by favorable currency rates.

The Munich-based car maker, which produces the namesake BMW brand sedans and sport-utility vehicles, Rolls-Royce, the MINI luxury compact car, and BMW's iconic motorcycles, forecast another record year in sales in 2016 after selling 2.25 million vehicles last year. But investors noted that BMW is losing ground against rivals Daimler AG, which makes the Mercedes-Benz brand, and Audi AG.

"The numbers presented today reflect the past," Frank Schwope, analyst at Nord/LB, said in a note to clients. "In the present and future (BMW) is likely to face increased pressure from the competition."

BMW said it would propose to shareholders to raise the dividend on common shares to EUR3.20 from EUR2.90, and on preferred shares to EUR3.22 from EUR2.92. Nominally, the dividend is higher, but investors noted that the payout is flat as a percentage of earnings.

"We understand that the lack of any special dividend and flat payout disappoint," Arndt Ellinghorst, head of automotive research at Evercore ISI, said in a note. "Management has indicated to do more for shareholders for quite some time."

That's why investors will listen closely when BMW Chief Executive Harald Krüger presents the company's new strategy next week. In addition to hearing how the freshman CEO plans to steer the company through the challenges facing the global auto industry, investors are hoping he will announce a more generous dividend policy for the future.

"We clearly expect this to be the case," Mr. Ellinghorst said.

Mr. Krüger was handpicked by BMW's family owners Stephan Quandt and his sister Susanne Klatten, to take the wheel last year and steer the company's development of new technology such as electric vehicles, in-car digital services and new business models such as car-sharing.

He has been hailed as a bright, young executive more at home in the digital economy than his predecessor, Norbert Reithofer, who BMW insiders say refused to deal with email.

But Mr. Krüger isn't seen as much of a driving force as his predecessor, who had a powerful, commanding presence.

Mr. Krüger is quieter and his public appearances have raised questions about his ability to lead BMW's masculine culture. In September, as he took the stage at the Frankfurt Motor Show, Mr. Krüger fainted and was taken to a hospital for examination. Since then, he has made few public appearances.

Under Mr. Reithofer, BMW took the lead in the premium segment from Mercedes and took a big risk on electric vehicles, developing the i3 battery-electric compact urban vehicle and the i8 hybrid sports car. Mr. Krüger takes charge at a time when BMW's rivals are gaining ground and he will have to work hard to keep the company out front.

Over the past few months, Mr. Krüger has hinted that BMW as a brand must become more like Apple, developing an iconic hardware platform around which the company can build a vast array of digital services. He also wants to adapt BMW's processes and structures to the digital economy and step up development of electric vehicles.

BMW is expected to present a new model in its i-Series, possibly as early as next week, that will be more of a family car than either the i3 or i8. BMW has confirmed that it would announce a new i-model this year, but has declined to provide any details.

Shortly after taking charge at BMW, Mr. Krüger signed on to the joint acquisition of Nokia Corp.'s digital mapmaker, Here, with rivals Daimler and Audi, a sign of how the entire industry is moving into digital technology. Here's maps are a key component needed for self-driving cars and other digital services.

BMW has also stepped up its hiring of software programmers and plans to hire an additional 500 software engineers this year, the company said.

Mr. Krüger has also hired Jens Monsees, who worked at Alphabet Inc.'s Google on automotive issues for seven years, to take charge of BMW's digital strategy, according to a person familiar with the situation. He is currently chief digital officer on the management board of Arvato. BMW is expected to announce the appointment next week.

The move comes after Volkswagen AG, Europe's biggest car maker by sales, recently hired an Apple executive to take charge of its digital strategy and development.

Write to William Boston at william.boston@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BAYERISCHE MOTOREN WERKE AG (PREFERENCE) 0.79% 48.32 Delayed Quote.-22.19%
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Bayerische Motoren Werke Technical Analysis Chart | MarketScreener
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Harald Krüger Chairman-Management Board
Norbert Reithofer Chairman-Supervisory Board
Nicolas Peter Chief Financial Officer
Susanne Klatten Independent Member-Supervisory Board
Manfred Schoch Deputy Chairman-Supervisory Board
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