BMW raises full-year sales outlook

BMW raised its full-year sales and earnings outlook, as the world’s largest manufacturer of luxury cars by sales continues to enjoy strong international demand for its BMW, Mini and Rolls-Royce brands.

The BMW’s car division expects earnings before interest and taxation to exceed 10 per cent of revenue this year, compared with a previous forecast of more than 8 per cent.
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“Based on the considerably improved outlook, the BMW Group now expects to achieve an even greater improvement in pre-tax earnings than originally predicted,” the company said on Tuesday, following its custom of providing detailed margin guidance only at the automotive level. BMW’s profits before tax in 2010 were €4.8bn.

BMW, Daimler’s Mercedes-Benz and Volkswagen’s Audi are riding a wave of unprecedented demand for luxury vehicles, as newly affluent customers in emerging markets flock to showrooms to buy a much-prized slice of German engineering. BMW’s operating margins, however, are currently outstripping those of its two big rivals in the German luxury saloon segment.

“There’s just such an incredible demand from Asian emerging market consumers when it comes to branded goods,” said Arndt Ellinghorst, head of automotive research at Credit Suisse. “It’s almost like a new era for these [luxury carmakers]. BMW’s brand equity in China is similar to that of a luxury label like Hermès.”

BMW forecast that sales would top 1.6m this year, an increase of more than 10 per cent on the previous year and about 100,000 vehicles more than it had previously forecast.

During the first half of this year, BMW said it handed over some 830,000 vehicles to customers, an increase of 20 per cent compared to the same period in 2010.

“The key questions for BMW and its peers are first, whether Chinese demand can continue at this pace and second, what will these companies do with the extraordinary amounts of cash they are generating and accumulating,” said Max Warburton at Bernstein Research.

The Bavaria-based carmaker cautioned, however, that sales and earnings growth would still be damped during the second half of the year by changes affecting some of its high-selling models and the launch and production start-up of successor vehicles.

“Given that management guides conservatively, the new wording suggests a full-year 2011 margin of 11 per cent and more,” said Aleksej Wunrau at BHF-Bank. “This means that despite model switchover costs which will accrue in the second half of the year, [we believe] overall profitability can be kept up in the remaining quarters.”

BMW’s shares had tracked the blue-chip Dax index sharply lower in early trading, but reversed these losses following the announcement to record a gain of 0. 6 per cent to €67.10 at late afternoon. BMW is set to publish second-quarter results on August 2.

Separately, Martin Winterkorn, VW’s chief executive, said late on Monday that Europe’s biggest carmaker by sales would probably sell more than 8m vehicles for the first time this year, far more than the 7.3m vehicles it sold in 2010. VW delivered more than 4m vehicles in the first half of the year, including 2.5m units of its namesake passenger car brand.