* BMW Q2 EBIT 2.6 bln eur vs 2.23 bln forecast in poll
* Sales of BMW branded cars up 8.3 pct
* BMW Q2 automotive EBIT margin at 11.7 pct
(Adds CEO comments on cost cuts, China, pricing in Europe)
By Edward Taylor
FRANKFURT, Aug 5 New models and strong sales in
China helped BMW AG to beat second-quarter profit
forecasts and keep it on track to remain the world's biggest
luxury carmaker under the challenge of its German rivals.
Sales by the core BMW brand rose 8.3 percent to 458,000
vehicles, a record high, as new models such as the 4-series
coupe and 2-series compact helped the group to tap stronger
demand in China and Europe.
Earnings before interest and tax (EBIT) jumped 26 percent to
2.6 billion euros ($3.5 billion), the company said on Tuesday,
topping a forecast of 2.23 billion in a Reuters poll of
"This is a major beat and we remain convinced that the
street is underestimating BMW's medium- and long-term earnings
power," London-based ISI Group analysts said in a note.
BMW shares climbed almost 3 percent higher in early trade
but were almost flat at 1455 GMT, in line with Germany's
blue-chip DAX index.
Luxury carmakers weathered a six-year sales slump in Europe
thanks in part to strong demand from emerging markets. But signs
of a slowdown in some of those countries and a still fragile
recovery in Europe has raised concerns about future demand.
BMW cautioned on Tuesday that the crisis in Russia was
starting to make itself felt. After showing little change in the
first six months, regional sales fell more than 11 percent in
July, Chief Executive Norbert Reithofer said.
BMW's quarterly automotive EBIT margin, the best
profitability gauge for peer comparison, came in at 11.7
percent, exceeding the 7.9 percent achieved by Mercedes-Benz,
and 9.9 percent by Audi, as well as its own 8-10 percent target
BMW has quietly repositioned some of its best-selling models
upmarket. The coupe and convertible version of its 3-series have
been discontinued and replaced with vehicles badged as a
4-series, commanding higher list prices.
BMW has also expanded and renewed its range of luxury
offroaders. Sales of the new X5, which hit showrooms in late
2013, rose 29.7 percent in the first half, the company said.
The sale of more luxurious models will help offset lower
margins from BMW's growing range of smaller cars such as the
2-series and new versions of the Mini, which are expected to
account for more than 40 percent of the group's overall vehicle
sales in three years time, up from 25-30 percent currently, CEO
Investments to expand its China operations and to launch
new models and technology to cut carbon dioxide emissions, will
lower the profit margin on its autos division in the rest of the
year while remaining within the target range, Chief Financial
Officer Friedrich Eichiner said.
In response, BMW is reining in development costs by
cooperating with rivals. The group will continue pooling some
component purchasing with Daimler, and a decision on whether to
build a sportscar with Toyota is expected to be made
this year, Reithofer added.
"It is vital to contain rising costs, not to cut. We are not
talking about to cut costs," Reithofer said.
BMW also said it was in a regular dialogue with Chinese
antitrust authorities as the country's National Development and
Reform Commission (NDRC) launched a probe against rival
BMW said it was in discussions with the NDRC. "So far there
is no additional information about where this development will
lead to and we will see," Eichiner told analysts on a call to
Munich-based BMW reiterated it is targeting a significant
sales increase to 2 million vehicles or more this year, after
delivering a record 1.96 million Mini, Rolls Royce and BMW cars
The company also reiterated its goal to raise pretax profit
by up to 10 percent.
BMW faces strong competition from arch rivals Audi, part of
the Volkswagen group and Mercedes-Benz, owned by
Cutthroat competition between the German premium auto makers
has prevented price levels in Europe from recovering to
pre-financial crisis levels, Eichiner said.
Last year, BMW led the global premium race with 1.65 million
cars sold by the namesake brand, topping Audi's 1.57 million and
third-placed Mercedes with 1.47 million.
($1 = 0.7450 Euros)
(Editing by Laurence Frost and Mark Potter)