By William Boston 

MUNICH-- BMW AG, the German luxury car maker, warned of an difficult trading outlook for the rest of year, citing uncertainty in China, Europe and the U.S. which helped send its stock price more than 3% lower despite reporting improved first-quarter net profit.

This year would be marked by a number of uncertainties including moderate growth in China, political uncertainty in Europe, weakening demand in the U.S. and heightened competition in the premium car segment, BMW Chief Executive Harald Krüger said on Tuesday.

The sober outlook from BMW's chief contributed to around a 3% drop in the company's stock price, among the biggest declines in Europe as broader worries about the strength of the Chinese economy soured market sentiment.

BMW reported a 8.2% rise in net profit in the first three months of the year despite a slight drop in revenue and a decline in operating profit at its core automotive division, though the auto maker stuck to its forecast for improved sales and earnings this year.

The Munich-based auto maker said net profit rose to EUR1.64 billion ($1.90 billion) in the three months to March 31 from EUR1.52 billion in the same period last year on revenue of EUR20.85 billion, down 0.3% after currency swings offset a 6% rise in vehicle sales.

Earnings before interest and taxes, a key measure of BMW's operational performance, fell 2.5% to EUR2.5 billion, reflecting a 1.7% decline at the group's automotive division which includes the BMW, MINI and Rolls-Royce brands, and a drop of 18% at its motorcycle unit.

In contrast, BMW benefited from an improved performance from its financial-services unit and a lower tax charge.

"Our first-quarter performance is further proof of our ability to generate positive earnings with our core business, despite a volatile environment," said Chief Executive Harald Krüger said Tuesday. "The decisive factor for us isn't short-term profit but sustainable, profitable growth."

Mr. Krüger's comment comes as he is overseeing a shift in strategy at the German auto maker which is increasing its emphasis on electric vehicles in addition to investing in new technology to head off upstart competitors, such as the ride-sharing service Uber Inc. and Alphabet Inc.'s Google, which threaten to upend the global auto industry.

Sales of the BMW brand vehicles achieved a record in the fist quarter, rising 6% to 478,743 vehicles, driven by sales of the BMW flagship 7-series, the X1 compact sport-utility vehicle, as well as the X3 and X6 sport-utility models.

Looking ahead to the full year, BMW reaffirmed its outlook for slightly higher earnings and revenue. The EBIT margin at the group's automotive division is expected to be within a range of 8% and 10%, Mr. Krüger said. It was 9.4% in the first quarter.

The results were largely in line with analysts' expectations.

"BMW's outlook remains unchanged for a slight increase in group EBIT. Overall, a solid start to the year," Arndt Ellinghorst, head of automotive research at Evercore ISI, said.

--Friedrich Geiger contributed to this article.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

May 03, 2016 04:46 ET (08:46 GMT)