FRANKFURT -- BMW's first-quarter pretax profit fell 4.6 percent, the world's largest premium carmaker said on Tuesday, as the weak dollar and the changeover in its key 3-series car dragged on its core automotive result.
BMW reaffirmed though that it expects earnings this year to roughly match its record 2004 result, helping soothe investor fears after rumors of a profit warning surfaced last week.
Earnings before taxes declined to 812 million euros ($1.05 billion), compared with an average Reuters poll estimate of 834 million and 851 million euros for the first quarter last year.
"Significantly higher raw material prices, currency factors and increased competitive pressure all had a negative impact during the first quarter 2005," the company said in a statement.
"The figures didn't come out necessarily better than consensus, but better than some had feared, which is why there's a bit of a relief rally in the share today," said WestLB analyst Fredrik Westin.
BMW said automotive pretax profit fell a steeper 5.4 percent to 702 million euros due to the weak dollar and model changeovers, leading to a first-quarter earnings margin for the division of 7.05 percent versus 7.6 percent a year ago.
"The big unknown in the equation here is the launch costs of the 3 series, which are very hard to guesstimate," said Michael Raab of Bank Sal. Oppenheim.
Net profit was in line with expectations, though, falling 0.8 percent to 519 million. Cashflow rose nearly 13 percent to 1.29 billion while revenue dipped to 10.36 billion.
During a conference call with reporters, BMW finance chief Stefan Krause said that the market launch of new products such as the 3-series sedan led to a 5.5 percent increase in sales and administration costs to 1.11 billion euros.
He said profits took a bigger hit due to the 29 percent fall in first-quarter 3-series sales ahead of its relaunch, however.
Krause warned that results in the coming quarters would be negatively affected by the ongoing depletion of currency hedging contracts executed in the past at more favorable rates.
The 30-percent decline in the value of its interest and currency derivative assets to 1.89 billion since the end of 2004 reflected this in part, he said.
He confirmed more than half the group's net dollar exposure was still hedged for this year. In March, Krause forecast a 2005 earnings impact that would be "far more negative" than the "low-triple-digit-million euro" currency hit seen last year.
While the CFO says he will not lock in exchange rates for a year or more at current levels, he will look to increase foreign exchange protection by buying short-term contracts on euro dips.
The United States is BMW's biggest market and accounts for nearly a quarter of group car sales.
A raft of hot new models such as its 1-series hatchback and X3 SUV has pushed BMW from one record to another, leaving rival Mercedes Car Group in its dust.
BMW said last month the 1 series helped group car sales rise 8.2 percent in the first quarter to a record 292,207 vehicles.
The launch of its revamped 3-series sedan means its core BMW brand may take over the pole position from Mercedes-Benz as the world's best-selling luxury marque this year.
Chief Executive Helmut Panke told reporters the car's launch in early March had gone "magnificently" and surpassed BMW's expectations, adding April group car sales rose some 7 percent.
He later told analysts that the performance of the BMW 1 series was "clearly fulfilling" his expectations, both in terms of mix and profit, thanks to a significant amount of options put into the new compact model.
But while most analysts agree that BMW remains one of the most fundamentally solid companies in the industry, the market has yet to really reward the stock as record earnings last year, soft markets and a weak dollar limit upside growth ahead.
Shareholders who have owned equity in BMW since October 2001 have not realized any better return on their investment than the performance of the DJ Stoxx European auto index.
"The rate of growth is a little bit slower than what we anticipated two years ago, three years ago with all the new products on the market...we wish we could have grown earnings quicker than we can right now," Krause told analysts.