BMW Expects Earnings
To Be Flat in 2005
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
March 16, 2005 9:54 a.m.
German luxury auto maker BMW AG Wednesday said its 2005 earnings would be flat, as the weak dollar and higher steel prices would offset an expected rise in car sales.
"Some adverse factors will arise in 2005 as a result of a combination of increased market competition, the effect of the U.S. dollar exchange rate and an above-average increase in the price of important raw materials," BMW said. "Despite these adverse factors, the BMW Group aims for 2005 to achieve approximately the high earnings level of 2004."
The Munich-based car maker said it expects vehicle sales, which totaled 1.25 million in 2004, to rise at a "high single-digit" percentage rate this year. Chief Executive Helmut Panke said he expects BMW to post record first-quarter unit sales, beating the previous year's mark of 269,973 vehicles.
BMW, which also makes cars under the Mini and Rolls-Royce brands, is renewing its entire model line. It has seen sales and profits rise as it launches new versions of old products such as its mainstay 5-series, as well as vehicles that reach new market niches beyond the company's basic line of sedans and wagons, such as the X3 sport utility vehicle and 6-series.
The U.S. dollar dropped sharply last fall against the euro, a development that makes European companies' products more expensive on foreign markets and cuts into the value of their earnings abroad.
Chief Financial Officer Stefan Krause said in a speech that "in 2005, the currency impact on earnings will be far more negative than in the last business year."
Mr. Krause said that moves in foreign-exchange rates burdened 2004 earnings by a "low three-digit-million euro" sum. BMW has hedged more than 50% of its foreign-exchange exposure in 2005, but Mr. Krause noted the rates at which it hedged weren't as favorable as in 2004.
BMW said it annual sales target for the Rolls-Royce brand remains at 1,000. It failed to achieve this goal in 2004 -- the first year that BMW produced the ultra-luxury autos. Mr. Krause said BMW needs to average sales of 1,000 Rolls-Royce cars a year in order to meet its profitability targets for the brand.
BMW earlier this month posted a 14% increase in full-year earnings for 2004. Net profit rose to ?2.22 billion ($2.96 billion) from ?1.95 billion in 2003, while sales rose 6.8% to ?44.34 billion.