Bloomberg News

BMW Profit Beats Estimates as 1-Series Drives Its Sales

May 03, 2012

The car and motorcycle manufacturer is expanding to fend off efforts by Volkswagen AG’s Audi and Daimler AG’s Mercedes-Benz to grab the sales lead in luxury autos by the end of the decade. Photographer: Scott Eells/Bloomberg

The car and motorcycle manufacturer is expanding to fend off efforts by Volkswagen AG’s Audi and Daimler AG’s Mercedes-Benz to grab the sales lead in luxury autos by the end of the decade. Photographer: Scott Eells/Bloomberg

Bayerische Motoren Werke AG (BMW), the world’s largest maker of luxury vehicles, reported first-quarter profit that beat analyst estimates as demand for the overhauled 1-Series compact fueled record deliveries.

Earnings before interest and taxes rose 19 percent to 2.13 billion euros ($2.8 billion) from 1.8 billion euros a year earlier, the Munich-based company said today in a statement. The figure beat the 1.74 billion-euro average estimate of nine analysts surveyed by Bloomberg. Sales rose 14 percent to 18.3 billion euros, outpacing the 11 percent rise in deliveries.

“The higher revenue gain shows that prices increased, which led to higher profit,” said Hans-Peter Wodniok, an analyst at Fairesearch in Kronberg, Germany, who has a “reduce” rating on the shares. “The sport-utility vehicles did very well and the 1-Series shot off like a rocket.”

Sales of the 1-Series, which was revamped late last year, climbed 20 percent and the X3 SUV surged 55 percent, lifting sales to 425,528 vehicles. BMW is counting on demand for a new generation of the best-selling 3-Series sedan, which was introduced in February, to boost deliveries further and offset development costs for the i3 battery-powered city car, which will be rolled out in 2013.

BMW shares rose as much as 4.1 percent to 73.95 euros and were up 3.5 percent as of 11:54 a.m. in Frankfurt trading. The stock has risen 42 percent this year, making it the top- performing carmaker in the 14-member Euro Stoxx Autos and Parts Index and valuing the company at 46.8 billion euros.

Luxury Goal

The car and motorcycle manufacturer is expanding to fend off efforts by Volkswagen AG (VOW)’s Audi and Daimler AG (DAI)’s Mercedes- Benz to grab the sales lead in luxury autos by the end of the decade. The maker of BMW, Mini and Rolls-Royce models will start production at a second plant in China this month.

BMW has halted a planned factory in Brazil, as it reviews regulatory changes by the country’s government, Chief Executive Officer Norbert Reithofer said today.

The maker of the Z4 roadster stuck to its target of increasing earnings for the full year, with the auto unit generating a margin at the upper end of the 8 percent to 10 percent range and sales beating last year’s record. Chief Financial Officer Friedrich Eichiner said today that it was too early to adjust the guidance in light of risks that the fallout from Europe’s debt crisis spreads.

Higher Investments

BMW’s auto unit recorded Ebit of 11.6 percent of sales, down from an 11.9 percent margin a year ago on weaker prices in Europe and additional development spending of a “low three- digit-million-euro” amount, Eichiner said. The margin beat Audi’s 11.4 percent return on sales and Mercedes’s 8.4 percent.

“We are taking advantage of our earnings power to make targeted investments,” Eichiner said on a conference call. Additional spending of 800 million euros to 1 billion euros this year to improve fuel efficiency “will secure us a stronger market position in the future.”

The world’s top three upscale carmakers are all projecting sales records this year on growth in China and recovering spending in the U.S. BMW is targeting sales of at least 2 million vehicles by 2016 after delivering 1.67 million in 2011.

Backed by the 1- and 3-Series and a new four-door version of the 6-Series luxury coupe, BMW expects deliveries in 2012 to rise even as the debt crisis in Europe softens demand in its home region.

The company has projected sales this year to rise by at least 10 percent in China and by a “high single-digit” rate in North America, offsetting a market decline of as much as 5 percent in Europe. Sales in April rose about 6 percent for the group, BMW said today.

“All our efforts are clearly geared toward remaining the leader in the premium segment,” CEO Reithofer said today.

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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