BMW badly misses pretax profit estimates

FRANKFURT (Reuters) - BMW (XETRA: - ), the world's largest premium carmaker, posted a 6.3 percent rise in third-quarter pretax profit that fell far short of market expectations, but it reaffirmed its full-year forecast.

Earnings before tax increased to 765 million euros ($1.11 billion), badly missing the average estimate of 913 million euros from a Reuters poll of 20 analysts due to weaker than expected profits at its core automotive division and a significantly higher loss on its "reconciliations" line.

Its automotive pretax margin slid 10 basis points to 5.4 percent in the quarter, lagging the poll estimate of 6.0 percent.

"Segment earnings were adversely affected by exchange rate fluctuations, higher raw material prices, market launch and production start-up costs for new models and higher research and development costs," the company said in a statement.

Its shares fell 2.7 percent in early trading.

BMW continues to expect record pretax profit this year, excluding a one-off gain of 372 million euros booked in 2006 from a Rolls-Royce (LSE: - ) convertible bond.

Taking this into account, the guidance implies a pretax profit would have to grow by over a fifth to more than 1.07 billion euros in the final quarter alone following a run rate of just 894 million per quarter.

At the end of September and just over a year into the job, Chief Executive Norbert Reithofer unveiled the results of the group's strategic review that should position BMW for profitable growth well into the next decade.

Despite plans to sell significantly more than 2 million cars by 2020, save some 6 billion euros in future costs and lift its core automotive division's operating margin to 8-10 percent by 2012, investors criticized Reithofer's vision as unambitious.

Shares have since fallen 8.4 percent from session highs the day he announced his plan, lagging both a 1 percent decline in the German blue-chip DAX and a 4.3 percent gain in the European auto index.