UPDATE 1-BorgWarner net up on demand for fuel-efficient vehicles

Thu Jul 25, 2013 12:05pm EDT

* Pays first dividend since 2009

* 2013 earnings forecast raised

* Buys back 6 mln shares in last 5 quarters

* Operating profit margin 12.9 pct in Q2

By Bernie Woodall

July 25 (Reuters) - BorgWarner Inc, maker of automotive turbochargers and emission systems, posted higher-than-expected profit on Thursday as global demand for more fuel-efficient vehicles continued to rise in the second quarter.

Borg Warner boosted its earnings forecast for 2013 to a range of $5.40 to $5.55 per share from a previous range of $5.15 to $5.45.

"Right now, auto manufacturers are wanting higher fuel economy, and BorgWarner's technology is helping them do that," said analyst Richard Hilgert of Morningstar.

It earned $1.50 a share, beating analysts' expectations of $1.40, according to Thomson Reuters I/B/E/S.

Analyst Ravi Shanker of Morgan Stanley said BorgWarner is making a strong showing in Europe, where its margins were 13 percent in the quarter despite weak automotive sales.

Its overall operating margin was 12.9 percent in the quarter, a company record.

The company, based in suburban Detroit, announced a quarterly cash dividend of 25 cents per share for its common stock. This is the first dividend since it suspended payouts in early 2009, at the height of the automotive industry crisis.

In 2007, BorgWarner paid a dividend of 85 cents per share in each quarter.

Shanker said the dividend "is not particularly large but allows BorgWarner to check that box and satisfy investors looking for cash return while the growth story continues."

BorgWarner narrowed its annual net sales growth projection to between 3 percent and 5 percent from between 2 percent and 6 percent.

Quarterly net earnings rose to $142 million, or $1.50 per share, from $121 million, or $1.00 per share, in the year-earlier period. Excluding one-time items, last year's second quarter earnings were $1.36 per share.

The company repurchased about $100 million worth of its shares in the quarter.

Chief Financial Officer Ronald T. Hundzinski said on a conference call with analysts that the company's priority for spending was "strategic" acquisitions, after capital expenditures and paying a dividend.

"However, in the absence of a deal, repurchasing shares remains an option for us and we have repurchased over 6 million shares in the last five quarters," Hundzinski said.

Joseph Spak of RBC Capital Markets said, "We don't believe (the dividend) will preclude BorgWarner from pursuing merger and acquisition opportunities."

Sales totaled $1.89 billion, compared with $1.86 billion a year ago. Analysts expected $1.92 billion.

BorgWarner shares dipped 3 cents at $92.14.

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