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BMW Targets Higher 2008 Profit Despite Headwinds

BMW, the world's largest premium carmaker, forecast higher underlying profit in 2008 asit keeps margins at its core automotive business at least steady despite high raw material costs and a strong euro.

BMW said 2008 earnings before tax should exceed last year's adjusted 3.78 billion euros ($5.98 billion) that excludes a one-off 97 million-euro gain linked to a Rolls-Royce convertible bond.

The expectation compares with an average forecast of 3.85 billion euros from 19 analysts in Reuters Estimates.

BMW anticipates the hit from the dollar's weakness to ease to 400 million euros or less this year after a 517 million drag in 2007, Chief Financial Officer Michael Ganal told its annual news conference on Tuesday.

Chief Executive Norbert Reithofer said he planned to increase the group's dividend payout ratio in steps. BMW hiked the distribution to 22 percent of net profit for 2007 from 16 percent the previous year.

BMW, which also makes Mini cars and Rolls-Royce luxury limousines, estimated it would save hundreds of millions of euros in purchasing costs this year.

The company took a combined hit of 805 million euros last year from foreign exchange rates and raw material costs, compared with 844 million it racked up in 2006.

"A spot price of $1.50 dollars per euro or more will not find its way onto our income statement," Ganal said.

Reithofer played down the potential impact of a U.S. economic slowdown, saying he expected BMW to sell at least as many vehicles in the United States this year as it did in 2007.

BMW shares rose 4.2 percent to 32.41 euros by 1156 GMT, outperforming a 2.9 percent gain in the DJ Stoxx European car sector index.

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