BMW, the world's largest premium carmaker, posted a better-than-expected 8.3 per cent decline in 2005 pretax profit, as higher raw material costs and adverse currency rates ate away at margins.
Earnings before tax dropped to £2.26 billion, just beating an average forecast of €3.20 billion in a Reuters poll of 20 analysts, and compared to a restated €3.58 billion in 2004.
"The BMW Group is currently the premium manufacturer with the highest sales volume in the world and is also ahead of almost all of its direct competitors in terms of profitability," chief executive officer Helmut Panke said in a statement.
Its reported 2005 return on sales of seven per cent before tax easily beats German rival Audi's 4.9 per cent margin but comes nowhere close to Porsche's industry-leading 18.8 per cent return in its last fiscal year.
BMW's pretax earnings at its core automotive business last year marginally beat poll estimates, sliding 5.9 per cent to €2.98 billion due to forex and raw material hits.
"Adjusted for positive effects from the treatment of pension obligations, BMW's fourth-quarter automotive margin of 6.6 per cent was slightly better than expected," Dresdner Kleinwort Wasserstein analyst Arndt Ellinghorst said.
BMW proposed hiking its dividend 3.2 per cent to €0.64 per ordinary share, lower than the €0.69-payout the market expected on average.
"The fact that they didn't raise their dividend any further - we expected €0.70 per share - was a disappointment when viewed against the 11 per cent increase in net profit. We would hold the stock," Mr Ellinghorst added.
The Munich-based carmaker also said it would ask shareholders at its annual general meeting on May 16 to authorise buying back 10 per cent of its stock.
BMW completed its last buyback programme on February 15, acquiring three per cent at an average price of €37.51 per share or roughly €759 million. It plans to retire this stock.
"Our present authorisation expires in November so a new one would give us more flexibility," a spokesman for BMW said.
Group earnings took a €356 million non-cash hit before taxes last year due to losses in the fair value of an option on a bond that BMW issued in December 2003 and that is convertible into aircraft engine maker Rolls-Royce shares.