BMW Profits Rocket, Boosted by Global Market Bounce

Premium autos are in strong demand, and BMW does not expect that to change in the short term.

BMW reported a spectacular profit comeback on Wednesday, turning in an 11-fold increase for the third quarter on recovering global demand for its up-market vehicles.

Although many people in Europe and the United States are worrying about recovery from the economic crisis and unemployment, as evidenced in a swing against President Barack Obama in U.S. elections, luxury car makers in Germany are riding high, largely on demand from emerging markets.

Latest data on auto sales in Europe generally show a slump from levels last year which were stimulated by now phased-out government subsidies.

But premium autos are in strong demand, and BMW "does not expect that to change in the short term," finance director Friedrich Eichiner told a telephone press conference.

"Strong demand for our models, a high-value model mix and the group's strong sales position on international automobile markets resulted in above-average earnings," a statement added.

BMW said net profit leapt from the equivalent figure last year when the sector was in a slump, to 874 million euros (US$1.2 billion).

The German group also raised its closely-watched profit margin target for this year.

Third-quarter sales surged by slightly more than a third, by 35.6% to 15.9 billion euros from 11.76 billion euros, exceeding the 14.27 billion euros expected by analysts.

"Generally speaking, the premium sector is still doing better than the rest of the automobile market," Bank Metzler auto analyst Juergen Pieper told AFP.

He added, however, that "BMW's results are a little disappointing compared with those of Audi and Daimler," and BMW shares showed a small loss in midday trading on the Frankfurt stock exchange.

Frank Schwope, an analyst at NordLB bank, said BMW showed "very strong development in the third quarter, following the path set by Daimler and Volkswagen," which own Mercedes Benz and Audi, respectively.

Like those premium automakers, BMW suffered a steep slump in 2009, though it still managed to post profits.

Core earnings at the German group this time around climbed to 1.19 billion euros from 55 million in the third quarter of 2009, but missed an average analyst forecast of 1.25 billion euros.

Eichiner noted that "the seasonal slowdown (often seen this time of year) was not as strong as expected."

BMW still plans to sell more than 1.4 million vehicles by end December, and raised the forecast for core profit margin from its auto division to more than 7% from more than 5% previously.

BMW also said it was now aiming for a profit margin of between 8% and 10% for its core auto activities in 2012.

Schwope said Audi, BMW and Daimler now "present comparable operating margins of around 8.8%."

Looking ahead, BMW said: "The broad recovery taking place on international car markets gives reason to believe that sales volumes will be significantly higher, particularly in emerging markets.

"Economic recovery is also likely to continue in the U.S.A., giving sales volumes another boost," the car maker added.

BMW forecast "a significant increase in group pre-tax earnings for the full year 2010," but did not provide a detailed figure.

Copyright Agence France-Presse, 2010

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