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BMW Shares Fall Despite Record Profit

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03/09/2016 | 01:05pm EDT

BMW AG reported strong 2015 earnings and sales gains but its shares fell nearly 2% on Wednesday after the German premium car maker disclosed a lower-than-expected dividend increase.

Net profit in 2015 rose 10% to ?6.4 billion ($7.05 billion), compared with ?5.8 billion a year earlier. Revenue increased 15% to ?92.2 billion from ?80.4 billion, helped by favorable currency rates.

The Munich-based auto 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, the owner of Mercedes-Benz cars, 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 ?3.20 from ?2.90, and on preferred shares to ?3.22 from ?2.92. 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."

Investors will be listening closely next week when BMW Chief Executive Harald Krü ger presents the company's new strategy. In addition to hearing how the CEO plans to steer the company through the challenges facing the global auto industry, investors are hoping for a more generous dividend policy, Mr. Ellinghorst said.

Mr. Krü ger was handpicked by BMW family owners Stefan 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 into new business models like 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. Krü ger isn't seen as much of a driving force as his predecessor, who had a powerful, commanding presence.

Mr. Krü ger 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. Krü ger 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-Benz and took a big risk on electric vehicles, developing the i3 battery-electric compact urban vehicle and the i8 hybrid sports car. Mr. Krü ger 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. Krü ger has hinted that BMW as a brand must become more like Apple Inc., 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. Krü ger 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 also stepped up its hiring of software programmers and plans to hire an additional 500 software engineers this year, the company said.

Mr. Krü ger has also hired Jens Monsees, who formerly worked at Alphabet Inc.'s Google on automotive issues for seven years and most recently was chief digital officer at Arvato, a division of Bertelsmann. Mr. Monsees will coordinate the digital efforts of BMW's various operations, the company said.

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.
ALPHABET 0.90% 1194.1639 Delayed Quote.13.26%
APPLE 1.07% 212.52 Delayed Quote.33.36%
AUDI AG 0.00% 794 Delayed Quote.1.53%
BMW VZ 1.58% 48.94 Delayed Quote.-22.42%
DAIMLER AG 1.50% 41.955 Delayed Quote.-9.97%
NOKIA OYJ 0.05% 4.6475 Delayed Quote.-7.65%
ROLLS-ROYCE 1.98% 784.2 Delayed Quote.-7.35%
VOLKSWAGEN AG 1.06% 142.64 Delayed Quote.1.60%
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