FRANKFURT — German luxury carmaker BMW AG said Tuesday its profit in 2010 is set to rise more sharply than previously anticipated because vehicle sales are expected to be better than hoped and its financial services division is experiencing a recovery, The Wall Street Journal reported.
"Improved business conditions on the international automobile markets mean that the BMW Group now expects to report much better second-quarter and full-year earnings than previously forecast," the Munich-based firm said in a statement.
The improved outlook sent shares of BMW soaring 7.4% to €41.78 ($52.61), making the company the strongest gainer on Frankfurt's DAX Index, which was up 1.6 percent.
The luxury car market was hit hard by the financial crisis and resulting economic downturn, with sales and earnings turning anemic in 2009. However, there has been a faster-than-expected rebound in the segment in recent months, driven by soaring demand in China and a recovering U.S. market.
BMW now expects vehicle sales this year to rise by about 10% to more than 1.4 million cars, after previously forecasting a rise in the single-digit percentage range to more than 1.3 million cars. The company sold 1.29 million cars in 2009, down 10.4% from a year earlier.
Despite a tough 2009, BMW has managed to remain profitable at a time when many rivals were posting losses. It scaled down production quickly to avoid cash-burn through bloated inventories.
In the first six months of 2010, a total of 696,026 BMW, Mini and Rolls-Royce cars were delivered to customers, up 13 percent from a year earlier.
BMW said it expects the full-year margin on earnings before interest and tax, or Ebit, to exceed 5 percent in its core automobiles segment this year.
"As a result of attractive market conditions and a less acute risk situation, the financial-services segment is striving for a significant increase in pretax earnings, with a target return on equity of over 18 percent," BMW said.
In March, BMW had forecast a significant improvement in full-year earnings, with the automobile segment forecast to achieve single-digit sales volume growth and an Ebit margin within a low, single-digit percentage range. An improvement in its financial-services segment earnings had also been forecast at the time.
Ian Robertson, BMW's sales chief, said in a interview last month BMW still expects to remain the world's best-selling luxury car maker by sales this year ahead of its major rivals Audi AG and Daimler AG's Mercedes-Benz.
Robertson said BMW has phased out the old version of its 5-series earlier than expected in the United States, where the new-generation 5-series has just been launched. The series is a key model for BMW both in terms of sales volume and revenue per car, and is expected to drive sales growth in coming months.
BMW is scheduled to release detailed second-quarter earnings Aug. 3.
