BMW sees 5-7% long-term annual unit sales growth

FRANKFURT, Mar 16 (Reuters) Germany's BMW, the world's biggest maker of premium cars, expects to boost unit sales by 5-7 per cent a year in the long run, Chief Executive Helmut Panke told an analyst conference on Thursday.

''When you look at the long-term sales growth... statistically, historically, BMW will have an annual growth rate of between 5 and 7 per cent,'' he said during the meeting, which was carried on the company's website.

He reiterated that the 14 per cent unit sales growth BMW generated in the first two months of 2006 could not be sustained over the whole year because comparisons would become increasingly hard, given the launch last year of updated 3-Series cars.

Chief Financial Officer Stefan Krause said BMW would focus on using its excess cash to finance internal growth, especially in the premium car segment.

''The main priority remains to use that cash to grow our business,'' he said when asked about BMW's strategy for investment versus paying higher dividends, conducting more share buybacks or adding to pension contributions.

BMW shares rose 2.2 per cent to 43.62 euros by 1237 GMT (1807 IST), extending Wednesday's gains on the strength of the group's forecast it would post record pretax profit of 4 billion euros in 2006, including one-off gains.

Hurt by the strong euro, higher raw material prices and financial losses, pretax profit fell 8.3 per cent last year to 3.29 billion euros, despite record car sales.

MARGINS TO IMPROVE The pretax margin at its core automotive business fell to 6.5 per cent from 7.4 per cent in 2004, but BMW expects the return on sales to recover in the future, Panke said.

''We don't see the 6 per cent margin in the automotive segment as the realistic target for the future. We expect the margins to go back up again,'' he said without being more specific.

Panke, who turns 60 in August, skirted a question on whether he would stay chief executive after his term expires next year.

''We have not started any discussion,'' Panke said, but added he was enjoying himself in his job. ''I like being captain,'' he said.

Panke said capital expenditure would total around 4 billion euros this year versus 3.99 billion in 2005 including capitalised development costs.

Its medium-term plan to invest 19 billion euros on capital spending already covers capacity for two new models due for launch in 2008, he added.

Krause said research and development spending under IFRS accounting rules could rise a little this year. Total R&D costs rose 10.5 per cent in 2005 to 3.12 billion euros.

Krause reiterated that BMW was well hedged this year against its foreign exchange exposure to the dollar but suggested analysts keep an eye on the group's yen exposure.

''I am going to give you that hint. Look at the yen, because we might have a larger story on the yen this year than we had on the yen last year,'' he said.

Japan accounted for 4.4 per cent of unit sales in 2005.

BMW shares have outperformed European peers by more than 3 per cent this year, helped by its decision to depart from previous practice and give a concrete 2006 earnings target.

Lehman Brothers said the 4 billion euro goal had surprised markets braced for a cautious 2006 outlook.

''On reflection, however, the fact of the target is rather more positive than its actual level, in our view. Indeed, it is merely for flat underlying pretax year-on-year, barely above consensus,'' it said in a note to clients.

''We still believe that the stock can reach 48 euros in due course. But news flow now turns more challenging, with slowing volume growth and two forex-constrained quarters. So we fear the stock will underperform in the near term.'' REUTERS SD PM1946