Record sales helped BMW to beat market expectations with a one-third rise in quarterly pretax profit, boosting its shares and prompting analysts to consider raising fullyear earnings estimates.
The world's biggest premium carmaker said yesterday that second-quarter profit before tax rose to 1.23 billion euros (£842 million) easily beating the average estimate of 1.04 billion (£712 million) from 25 analysts in a Reuters poll, on the back of a surprisingly strong performance at its core automotive division.
BMW said it sold more cars both on a quarterly and half-year basis than ever before.
In the three months to June, it delivered 365,547 vehicles to customers, a 3.2 per cent rise, as 3 Series sales helped compensate for a drop in demand for the X5 offroader.
"This year we succeeded for the first time in significantly overcompensating for the (raw materials and currency) headwinds," said finance director Stefan Krause.
Analysts had long criticised BMW's inability to boost financial performance on the back of its popular model lineup, including the 3 Series.
However this time BMW delivered with an earnings increase of 16 per cent at its core division.
Its automotive pre-tax margin expanded by 0.4 of a percentage point to 7.3 per cent, exceeding the poll average of 6.8 per cent.
BMW reaffirmed it expected a record 4 billion euros (£2.7 billion) in pre-tax profits for the full year and still fore-saw a year-on-year rise even when beneficial one-off effects are stripped out.
Its strong results complete the earnings season for German carmakers, which have all impressed with betterthan-expected results due to strict cost control and rising demand for models like the BMW 3 Series, VW Passat, Mercedes S-Class and Audi A6. With more than 2.5 billion euros (£1.7 billion) in pre-tax profit for the first half and management's expectation that the earnings hit from currency and raw materials would decline, analysts saw enough cushion for potential upgrades full-year to estimates.
Dresdner Kleinwort said the outlook "looks increasingly conservative, and earnings upgrades are increasingly likely".
But Mr Krause played this down, saying quarterly snapshots didn't fully capture underlying performance due to a volatile interplay of factors such as efficiency improvements, depreciation charges from its model offensive and external headwinds.
"The team still has a lot of work ahead of us in order to achieve this," he said.
The successor to the 3 Series Coupe and an updated X3 will be rolled out in September.
Looking further ahead, BMW is working on new variants of the British-built Mini and a new Rolls-Royce convertible.
The main surprises in BMW's second-quarter report were the significant earnings improvement at automotive, as well as in its so-called "reconciliations" line.
That is where intra-group profit is eliminated and nonoperational losses are booked.
Earnings before tax at "reconciliations" swung to a profit of 49 million euros (£34 million) from a loss of 104 million euros (£71 million) a year ago.
Those figures are significantly better than the continuing loss which was expected by analysts.
Industrial free cash-flow sank in the quarter to 1.66 billion euros (£1.1 billion) f rom 2.67 billion euros (£1.8 billion) a year earlier, although last year's figure was boosted by a final 1 billion euro (£68 million) payment from Ford for Land Rover.
After years of sales growth on the back of popular models such as the 1 Series hatch-back, the X3 offroader and the Mini subcompact ushered in by former chief executive Joachim Milberg and his successor Helmut Panke, BMW is seeing a change of guard.
Production chief Norbert Reithofer will replace Mr Panke as on September 1.
"Panke is bidding farewell with a good set of numbers," said WestLB analyst Horst Schneider.