MUNICH -- German premium carmaker BMW 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 Chief Executive Helmut Panke told the firm's annual news conference on Wednesday.
The guidance is broadly in line with analyst expectations of a 0.5 percent decline in 2005 pretax profits to 3.54 billion euros ($4.76 billion) from the record 3.55 billion posted in 2004, according to Reuters Estimates.
Panke later told reporters that he is also 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."
BMW shares outperformed a 1.7 percent drop in the DJ Stoxx European car sector index, dipping 0.7 percent to 34.29 euros by 1342 GMT. A profit warning from industry leader General Motors weighed heavily on the sector.
"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.
"If you put (the outlook) against the background of a couple of market participants having expected (BMW) earnings to be down this year on the back of negative forex effects and increasing raw material prices, this is quite a good picture," Sal. Oppenheim's Michael Raab said, sticking to his "buy" rating.
By comparison, Volkswagen's premium unit Audi said it could top the 1.14 billion euros 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, 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.
While BMW already can boast a 2004 group pretax profit margin of 8 percent, analysts were alarmed that fourth-quarter profits at its automotive division only grew some 6.8 percent, significantly lagging the 11 percent rise in deliveries.
SG's Barrier said the stock's outperformance was due in part to European car sales figures published on Wednesday that showed 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 6-9 percent this year.
Daimler stock trades at around 11.8 times 2005 earnings estimates while shares in BMW sell for a P/E multiple 10.6 times consensus forecasts, according to Reuters Estimates.
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.
He ruled out raising the group's hedges at current forex levels for 2005 and 2006 on a "strategic" basis by locking in rates for over a year into the future, but he said he might increase it "tactically" by buying on dips in the euro.
The group is more than 50 percent hedged for this year, but declined to quantify the exposure for 2006, saying only that BMW has taken tactical measures thus far.
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 labour pay cuts.
Speaking about BMW's plans to buy back and cancel up to 10 percent of its stock, the CFO said BMW hadn't decided yet on the final timeframe or ultimate scale but said the carmaker would have 18 months following shareholder approval to carry it out.
BMW also said it planned to invest around 19 billion euros within the next five years to expand operations. Total capital expenditure amounted to 4.35 billion in 2004, a rise of 2.4 percent over the previous year.