FRANKFURT -(Dow Jones)- BMW AG (BMW.XE) and Porsche Automobil Holding SE's (PAH3.XE) sports car unit reported robust profit gains in the first quarter from a year ago, reassuring investors that rising costs are so far doing little to offset the impact of strong global demand for luxury cars on the German manufacturers' performance.
BMW, the world's best selling manufacturer of premium cars ahead of Volkswagen AG's (VOW.XE) Audi brand and Daimler AG's (DAI.XE) Mercedes-Benz unit, still stuck to its conservative profit guidance for 2012, saying underlying profitability should decline as it invests heavily in extra production capacity and new technology.
"We are cautiously optimistic, but the economic risks remain," Chief Financial Officer Friedrich Eichiner said.
It was too early for BMW to make a more specific forecast for the full-year, but the group might update its guidance after the second-quarter results, Eichiner said.
"We are still aiming to achieve new record figures for sales volume and pretax earnings in 2012," BMW Chief Executive Norbert Reithofer said.
BMW's outlook comes as strong worldwide demand, particularly in China and the U.S., ensured German luxury car makers sold more cars than ever before in the first quarter despite a shrinking car market in Western Europe.
BMW's first-quarter net profit rose 18% on the year to EUR1.34 billion, while its closely-watched earnings before interest and taxes rose 19% at EUR2.13 billion. Pretax profit increased 22% year-on-year to EUR2.08 billion. Analysts had expected profit to come in lower than in the first quarter last year due to launch costs for new vehicles such as the new-generation BMW 3-series and 1-series.
Eichiner said BMW benefited from a streamlined cost structure, improved efficiency and a strong model mix with larger, more lucrative cars accounting for a bigger chunk of sales.
First-quarter revenue was up 14% at EUR18.29 billion as BMW notched up an 11% rise in sales to 425,500 cars, a new quarterly sales record helped by the recent launch of new versions of the high-volume BMW 1-series and 5-series models as well as continued strong demand for the X3 and X5 sports-utility-vehicles.
BMW is targeting new global sales records for its BMW, Mini and Rolls-Royce brands this year after selling a record 1.67 million vehicles in 2011, fueled by booming demand in China. But the pace may be hard to keep up in an increasingly competitive market in China particularly if the Chinese economy slows more sharply than expected.
Eichiner dismissed concerns about softening demand in China. BMW is struggling to produce enough cars to meet demand. Individual rebates for older cars such as the previous BMW 3-series generation are no indicators for general pricing pressure in China, he said.
"Who knows what happens next in that market, but investors can remain assured that whatever the opportunity or risk, BMW will probably handle it best," Sanford Bernstein analyst Max Warburton said in a note to clients. He rates BMW stock as outperform.
BMW reiterated its full-year margin on earnings before interest and taxes for its automotive business is expected to be at the upper end of its 8% to 10% long-term target range this year after 11.8% in 2011. It was 11.6% in the first quarter, compared with 11.4% at Audi and 8.4% at Mercedes-Benz.
Porsche's profit margin came in even higher with 17.5%, making its the world's most profitable car maker.
Operating profit at BMW's smaller rival rose 18% on the year to EUR528 million, while revenue improved 32% to EUR3.03 billion. Porsche's first-quarter sales increased by 29% to 30,231 cars, driven by the new-generation 911 sports car and the Cayenne sports utility vehicle. Porsche didn't provide a net profit figure.
At 1028 GMT, BMW shares were up 3.3% at EUR73.40, while the DAX30 bluechip index was up 1%. Porsche's preferred stock, its only traded securities, were up 2.9% at EUR46.99.
Read more: http://www.foxbusiness.com/news/2012/05/03/bmw-porsche-profits-rise-on-higher-sales/#ixzz1toV6YSEx
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