German carmaker BMW AG reported a 2.5 percent rise in first-quarter pre-tax profit on Wednesday, missing market expectations, but stood by its forecast to post record profits in 2004.
Earnings before taxes climbed to 851 million euros ($1.0 billion) from 830 million in the first quarter last year but fell below analysts’ expectations of 873 million euros.
The company, which builds cars under the BMW, Mini and Rolls-Royce brands, reaffirmed its forecast for record profits of more than 3.3 billion euros in 2004 thanks to a host of new models, including its X3 compact sport-utility, 6-series coupe, Mini Cabrio and the hotly anticipated 1-series hatchback.
Once again, BMW’s quarterly earnings benefited from a strong performance at its financial division, with a 23 percent gain in pre-tax profits to 132 million. Its core automotive division saw earnings rise by 3.2 percent to 742 million euros.
Overall group margins declined, with the return on sales dropping two-tenths of a percentage point to 7.9 percent.
“The profitability in its automotive division was a bit weaker than expected, but this is always the case when you launch new models,” said an auto analyst for Dresdner Kleinwort Wasserstein, adding though that cash flows were very strong.
“It’s one of the best run companies in the sector.”
BMW shares, which have underperformed its European automotive peers since January, were down 0.4 percent at 36.15 euros per share at 0908 GMT and roughly in line with the DJ Stoxx European autos index.
Quarterly net income increased 2.5 percent to 523 million euros, while group revenues climbed 4.9 percent to 10.81 billion euros, despite the strong euro.
A Reuters poll of 21 analysts had an average forecast for net profit of 533 million euros and revenues of 10.44 billion.
The Bavarian carmaker had already released first-quarter group vehicle sales in April, which showed a 3.2 percent increase to 269,973 units due primarily to record March figures.
Sales of its new X3 and 6-Series models were able to compensate for a 20 percent decline in 3-Series deliveries, which was due to a temporary shut down in production to refit the Munich plant in preparation for its eventual relaunch.
The group predicts overall vehicle sales for its three major brands to grow in 2004 on the back of its latest model offensive, the largest in its history.
“The BMW Group is increasingly seeing the benefit of the product and market initiative this year,” Chief Executive Helmut Panke said in a statement.
Sales of its BMW-brand cars will rise by a high single-digit percentage this year, the company said.
It reported a nine percent jump in vehicle sales in April compared with April 2003.
By comparison, rival DaimlerChrysler AG’s Mercedes Car Group reported a seven percent decline in operating profit to 639 million euros last week, amid a nine percent drop in unit sales.
Mercedes forecasts stagnant car sales, revenues and earnings for the full year.
