By William Boston
MUNICH--Shares in BMW AG, the Germany luxury car maker, tumbled
more than 4% in early trade Wednesday after the company's top
executives issued a cautious outlook for the year, warning of
weaker growth in China.
The Munich-based maker of luxury vehicles from high-end sedans
and sport-utility vehicles to Rolls-Royce ultraluxury cars,
forecast "solid growth" in profit, sales and automotive revenues
this year. The term, as commonly used in accordance with IFRS
reporting standards, implies growth of up to 10%.
"As always, our forecasts assume the economic conditions
world-wide remain stable and won't deteriorate," Chief Executive
Norbert Reithofer told reporters. "However many uncertainties
remain. Important markets like China are losing momentum."
BMW's shares have been trading at record highs over the past few
weeks, but slipped 4.2% to EUR116 by midafternoon trading on the
Frankfurt Stock Exchange.
BMW is typically cautious in its financial outlook and some
analysts believe the company could outperform its careful
forecasts.
"We are convinced that BMW will manage to sustain the high level
of 10-11% group (pretax profit) margins, deliver revenue growth and
generation significant cash," wrote Arndt Ellinghorst, an
automotive analyst with Evercore ISI research, in a note.
Currency market trends provide some support for the bullish view
on BMW. Friedrich Eichiner, the company's chief financial officer,
said the stronger dollar provided tailwinds in the second half of
last year that offset negative currency trends in the first half.
He added that the strong dollar would provide tailwind going
forward.
Mr. Ellinghorst said that BMW would have enough cash flow to
"efficiently innovate and pay higher cash returns to shareholders.
We keep our Buy rating and EUR160" target share price.
As previously reported, BMW sold 2.12 million vehicles last
year, including the BMW brand, MINI and motorcycles. Sales revenue
rose 5.7% to EUR80.4 billion. Net profit rose to EUR5.8 billion
last year, up from EUR5.3 billion in 2013, but below market
forecasts of EUR5.9 billion.
BMW's cautious warnings about China follow similar comment from
Volkswagen AG, Europe's biggest automotive group. When Volkswagen
released 2014 earnings last week it said there is "no guarantee
that 2015 will be a successful year," citing weaker growth in China
and an uncertain global economy.
China is the big question mark for the industry.
Mr. Reithofer said auto makers have been "spoiled" over the past
few years by high growth rates in China as the country morphed from
a nation of cyclists to the world's biggest auto market by sales.
Now, growth of auto sales is slowing in China and the overall
economy is expected to expand 7%.
"We expect a further normalization of the market in China," said
Mr. Reith.
Write to William Boston at william.boston@wsj.com
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