BMW results highlight global demand for luxury cars

German automaker BMW said Tuesday it would probably build its first assembly plant in Brazil after strong demand for luxury cars generated stellar earnings for the global leader.

Chief executive Norbert Reithofer told a telephone news conference he saw a "high probability" that BMW will build a factory in Brazil, one of the most dynamic auto markets in the world.

The decision will be made later this year, Reithofer added after BMW posted a second quarter net profit of 1.81 billion euros ($2.58 billion), more than double that of the same period a year earlier.

Sales were 16.5 per cent higher at almost 17.9 billion euros.

"We expect the business environment to remain favourable during the second half of 2011," the company said in a statement.

BMW's second-quarter operating profit soared meanwhile by 66.3 per cent to 2.86 billion euros.

The results topped analyst forecasts compiled by Dow Jones Newswires for a net profit of 1.59 billion euros and an operating profit of 2.41 billion euros.

Investors welcomed the news and BMW shares jumped 1.88 per cent to 68.98 euros in midday trading to top the main DAX index which was 0.54 per cent lower overall.

They closed the day down 2.57 per cent as the DAX slump intensified to 2.26 per cent on eurozone debt crisis concerns.

"BMW's magnificent second-quarter results exceeded already heightened street expectations," Dow Jones quoted Sanford Bernstein analyst Max Warburton as saying.

The group, which also owns the Mini and Rolls-Royce brands, sold a record 450,608 vehicles over the three-month period, an annualised gain of 18.5 per cent.

For the first six months of the year, sales jumped 19.7 per cent to 833,366.

BMW issued a new full-year target in July of more than 1.6 million sales.

"The first half of 2011 has been the best six-month period in the BMW group's history," Reithofer noted in the statement.

BMW dealers have been delivering more cars worldwide, but especially in China and the rest of Asia, the industry's global growth engine.

China now represents almost 15 per cent of the group's total sales, a level close to that of Germany itself.

"We are looking more and more in the direction of the BRIC countries," Reithofer commented in reference to Brazil, Russia, India and China.

German rivals Daimler, which owns Mercedes, and Volkswagen, which owns Audi, published solid quarterly results last week as well and raised their annual forecasts despite concern over debt problems in Europe and the United States.

Reithofer said sales had even been held back by production bottlenecks, saying the company was working at 102 per cent of capacity and that it might also make a substantial investment in its US plant.

The BMW statement noted that sales and earnings growth would also "be held down during the second half of the year" by changes to some popular models and costs stemming from the launch of others.

BMW finance director Friedrich Eichiner put the total amount of those charges at around 500 million euros.

Sanford Bernstein analyst Warburton nonetheless described profitability at BMW as "stunning" and added: "We think that only Porsche and Ferrari can claim to have ever met or exceeded this level of profitability in the global auto industry."

Source AFP