BMW expects record volumes

BMW expects record sales volume for all three group brands this year after 2007 revenue rose 14.3 percent to a record 56.02 billion euros, the world's No 1 premium carmaker said.

Shares in BMW bucked the sector trend, rising 2.4 percent at 38.33 euros by 1003 GMT versus a 1.6 percent drop in the DJ Stoxx European autos index.

Morgan Stanley analyst Adam Jonas said the figures were a relief for jittery markets after BMW beat the market consensus for fourth-quarter sales by over 10 percent.

But he cautioned this was not likely to lead to upward estimate revisions - an increasingly rare occurence for auto stocks right now.

"We're in the middle of the first round of estimate cuts for the sector," he explained, recommending investors to wait for the third or fourth round of cuts before raising exposure.

While BMW enjoys some defensive qualities such as a stronger balance sheet and franchise than other carmakers, he expected revenue growth to more than halve this year.

"In view of forex headwinds, raw material costs and rising depreciation, is it then realistic to expect any profit growth this year?" he said.

"We expect a new record sales volume figure in 2008, with stronger growth in the first half of the year and more moderate growth in the second," Chief Executive Norbert Reithofer said.

'Paramount importance'

He emphasized that sales growth and profitability are "both of paramount importance" to the group's future - a signal to investors concerned that the group is not doing enough to stem a chronic slide in its margins.

Reithofer reaffirmed the full-year 2007 earnings target for higher pretax profit excluding an exceptional gain in 2006 from the settlement on a Rolls-Royce convertible bond.

Turnover at BMW's core Automobiles division rose faster than vehicle sales last year, increasing by 12.7 percent to 53.82 billion - a gross figure, however, that includes revenue booked twice within different parts of the group and later eliminated.

Financial Services posted 25.8 percent higher sales at 13.94 billion euros.

Capital expenditure for property, plant and equipment as well as other intangible assets rose by 5.7 percent to 2.93 billion as BMW expanded its production network.

Including development costs recognized as assets, total capital expenditure at the group actually decreased by 1.1 percent to 4.27 billion euros.

A fall in fourth-quarter total capex spending as well as the 37,050 euros in revenue per vehicle sold surprised Morgan Stanley's Jonas, who had estimated full-year capex of 4.6 billion and a quarterly average price of 35,566 euros per unit.

Earlier this month, the company said unit sales rose 9.2 percent in 2007 to 1.50 million vehicles.

Agencies

(China Daily 02/01/2008 page16)