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. Last Updated: 07/27/2016

BMW Anticipates Record 2006 Sales

FRANKFURT -- BMW on Wednesday forecast record 2006 sales and earnings even without one-off gains as it uses brisk volume growth and efficiency improvements to counter the strong euro and high raw materials prices.

The world's largest luxury carmaker tweaked its guidance higher by not only repeating that 2006 pretax profit would hit a record 4 billion euros ($5.06 billion), but also adding that earnings excluding one-off divestment gains would advance to an all-time peak.

A 375 million-euro gain from selling shares in British aircraft-engine manufacturer Rolls-Royce helped first-quarter earnings before tax advance nearly 58 percent to 1.296 billion euros, topping analysts' estimates. Even excluding that well-flagged windfall, pretax profit rose 12 percent to 921 million euros as deliveries of its sleek sedans and sport utility vehicles climbed nearly 14 percent, led by robust sales of its flagship 3-Series BMW model.

"We are well on our way to achieving our target for a group profit before tax of 4 billion euros," chief executive Helmut Panke said.

"We want to attain a record profit that even without the book profit [from the Rolls-Royce transaction] will be the best in the company's history," he told reporters.

BMW's shares rose as much as 1.8 percent before dropping along with other German blue-chips. The stock fell 1.4 percent to 42.80 euros by mid-morning London time, lagging a 0.5 percent dip in the DJ Stoxx European car sector index.

BMW stock trades at just over 11 times estimated 2007 earnings, a premium to arch-rival DaimlerChrysler's multiple of around 8.8 times next year's earnings, Reuters estimated.

Despite unspecified headwinds from adverse currency effects and raw material prices, first-quarter net profit jumped nearly 81 percent to 948 million euros on revenue up 12.2 percent to 11.62 billion.

Pretax profit at the core automobile division rose 7.2 percent to 761 million, but its pretax profit margin slipped to 6.8 percent from 7.1 percent in the year-earlier period.

"In our view, Q1 was always going to be one of BMW's most difficult quarters of the year in terms of year-on-year comparisons and the pace of [currency] hedge rate deterioration," Morgan Stanley said in a note.

"They pulled off a positive margin surprise and managed to beat consensus by around 3 percent, adding further credibility to management's full-year targets," the bank added.

BMW said the negative impact of the strong euro and raw material costs would continue to weigh on earnings this year, but to a lesser degree than in 2005, when they combined for a billion euro hit.

CFO Stefan Krause said the carmaker would invest its growing cash pile to continue its model offensive and perhaps top up its pension fund.