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European Earnings: BMW Up, Daimler Down

Germany dominated earnings headlines from Europe Tuesday, with luxury-car maker BMW reporting a mixed set of first-quarter results, rival Daimler announcing worse-than-expected first-quarter earnings and Continental posting a 29 percent rise in first-quarter underlying operating profit.

2007 BMW 335i Convertible
2007 BMW 335i Convertible

Other heavyweights reporting earnings were Germany's Deutsche Bankand Allianz, as well as oil majors Royal Dutch Shelland BP.

BMW

The automaker posted a 24.8 percent drop in first-quarter pretax profit due to a hefty increase in risk provisions, according to the company.

Earnings before tax fell to 539 million euros ($844 million), it said.

This included a pre-announced 236 million charge on the back of falling U.S. resale prices for formerly leased vehicles and a 40 million expense to cut staff.

When stripping out one-off items, its automobile division's adjusted operating margin improved 60 basis points to 6.4 percent -- just surpassing German rival Audi, the luxury unit of Volkswagen, which reported on Monday a 6.2 percent return on sales before interest and tax.

Analysts in a Reuters poll published just before BMW warned on first quarter earnings last week had forecast on average pretax profit of 855 million euros on revenue of 12.57 billion.

Shares of VW closed 2.4 percent higher, but BMW shares ended 0.4 percent lower.

Daimler

Daimler's first-quarter earnings before interest and taxes (EBIT) fell a worse-than-expected 40 percentto 1.976 billion euros ($3.08 billion) as one-off charges weighed, the German car maker said.

It also inserted a line in its 2008 outlook to make clear on Tuesday its forecast for higher operating profit excluded lingering expenses for Chrysler, the ailing U.S. automaker in which it sold a majority stake last year.

It generated EBIT of 8.71 billion euros in 2007, when results had a net boost of around 1 billion from one-off items.

Daimler's remaining 19.9 percent stake in Chrysler lopped 340 million euros off first-quarter EBIT, it said, including 94 million euros for restructuring costs. It wrote down the value of Chrysler vehicles by 151 million euros.

Analysts polled by Reuters had on average expected first-quarter EBIT of 2.205 billion euros, down by a third from the year-earlier period, when the company booked 1.56 billion in income from the sale of shares in aerospace group EADS.

Revenue barely edged up to 23.46 billion euros in the first quarter, hit by the dollar's weakness.

Its Mercedes-Benz Cars premium auto division boosted EBIT by 45 percent to a better-than-expected 1.15 billion euros. That represented a margin of 9.2 percent versus 9.1 percent in 2007 and 10.4 percent in the fourth quarter alone.

Continental

Continental reported first-quarter underlying operating profit rose 29 percent and reaffirmed its full-year targets a day after French rival Michelin lowered its 2008 earnings guidance.

Earnings before interest and taxes (EBIT) and accounting effects from its recent acquisition of electronics and parts maker VDO grew to 569.5 million euros ($892 million), the world's fifth-largest auto parts maker said.

The group's first quarterly result that fully included consolidated figures from VDO was in line with a mean estimate of 560 million euros from a Reuters poll of 14 analysts.

"Backed by the solid results for the first three months, we are confident that we will achieve our targets for the year," Chief Executive Manfred Wennemer said in a statement.

Publicis

French advertising company Publicis Groupe beat forecasts with a 5.4 percent rise in first-quarter underlying revenue on Tuesday and said it expected further growth in the year ahead.

With net new business of $1.9 billion, the world's fourth largest advertising group forecast "good" revenue growth in 2008, led by the digital and media businesses and emerging markets and a recovery in health communications.

"I am confident but at the same time realistic. We are in an economic climate that calls for some caution ... There are many very positive signs," Chairman and Chief Executive Maurice Levy told a conference call.

Closely watched underlying revenue growth, which excludes currency changes, acquisitions and divestments, reached 5.4 percent in the quarter, beating market expectations of growth of around 4 percent but lagging the 7.4 percent achieved by domestic rival Havas.

Actual revenue rose 0.2 percent to 1.06 billion euros ($1.7 billion) in the first quarter as a weak dollar weighed.

At constant exchange rates revenue grew 8.2 percent.

Publicis, which acquired digital ad firm Digitas last year, said its digital business accounted for 18.4 percent of revenue in the quarter.

The sector is expected to represent 25 percent of revenue by 20110.

Digitas alone had underlying growth of 23 percent in the quarter.

And Nordic bank Nordea posted first-quarter operating profit above market expectations and repeated its outlook for 5-10 percent underlying profit growth this year.

Operating profit in the quarter was 885 billion euros ($1.39 billion) versus a mean forecast of 855 million euros and the year ago figure of 895 million euros.

While Spanish bank, Santander reported solid first-quarter net profit of 2.21 billion euros ($3.5 billion), up 22.4 percent and just ahead of forecasts as it began to consolidate some of its ABN Amro buy.

Without ABN, first-quarter net profit rose 14 percent to 2.06 million euros.

Net interest income, a key measure of banking profitability, rose 14.8 percent to 4.03 billion while operating profit was up 30.9 percent to 4.24 billion euros.

A Reuters poll of analysts had forecast Santander would make net profit of 2.15 billion euros, net interest income of 4.03 billion euros and operating profit of 4.14 billion euros.

-- Reuters contributed to this report