MUNICH, Germany -- BMW AG forecast roughly stable earnings for 2005 as the weaker dollar and rising raw material costs exact their toll on group profits despite advancing unit sales.
"The BMW group in the business year 2005 aims to achieve approximately the high level of earnings of the previous year," BMW CEO Helmut Panke said in the company's annual news conference on Wednesday.
The forecast is broadly in line with analyst expectations of a 0.5 percent decline in 2005 pretax profits to $4.75 billion from the record $4.76 billion posted in 2004, according to Reuters Estimates.
Panke later told reporters that he also is striving to keep profitability at BMW's core automotive division stable this year after achieving a pretax profit margin of 7.4 percent last year.
"A return on sales at this level is good. One won't be able to achieve dramatic improvements, whether one looks at the segment or at the BMW group," he said. "I would say the margin as such is certainly a very good target."
"The guidance is no surprise, since I also expected flat profits for this year," said Societe Generale analyst Philippe Barrier, who has a hold rating for the stock.
By comparison, Volkswagen AG's premium unit Audi AG said it could top the $1.53 billion earned before taxes last year as it strives to boost its operating profit margin to 8 percent by the end of the decade from 5 percent in 2004.
Perennial rival Mercedes, the luxury arm of DaimlerChrysler AG, has not given a 2005 profit target, but aims to boost its operating margin to 7 percent by 2007 from the 3.4 percent achieved last year.
European car sales figures published Wednesday showed that BMW increased group deliveries by nearly 24 percent in February -- the car industry's worst February in Europe in a decade.
BMW expects car sales to grow by 6 percent to 9 percent this year.
BMW finance chief Stefan Krause warned that the currency impact on earnings this year would be "far more negative" than what he called a "low triple-digit-million euro" hit it absorbed in 2004. He was not more specific.
Krause reaffirmed that BMW expected higher raw material costs to have a "low triple-digit million" euro impact this year following a low double-digit million euro hit in 2004.
The group hopes to offset these effects primarily through higher car sales -- Panke expects a record first quarter here in 2005 -- as well as lower purchasing costs and labor pay cuts.
Speaking about BMW's plans to buy back and cancel as much as 10 percent of its stock, the CFO said BMW hadn't decided on the final time frame or ultimate scale but said the carmaker would have 18 months after shareholder approval to carry it out.
BMW also said it planned to invest about $25.49 billion within the next five years to expand operations. Total capital expenditure amounted to $5.83 billion in 2004, a rise of 2.4 percent over the previous year.