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Wednesday, July 28, 1999 Published at 10:40 GMT 11:40 UK

Business: The Company File

Rover holds back BMW

BMW says the fall in profits will quickly be reversed

BMW said that model changes and slow sales at its UK subsidiary Rover were the main reasons for a 26.8% fall in profits.

The group's net income fell to 191m euro (£128m) from 261m euro (£175m) in the first half of the current year, but the decline was not as bad as the 32% fall analysts had expected.

"Phasing out the Rover 600 and 800 model lines as planned, and the dramatic drop in prices in the home market Great Britain were the main reasons for this decline," said BMW in a statement.

"The market conditions for Rover Cars continued to be difficult in the first half 1999," it noted.

Rover burden

It said the accelerated reduction of inventories in Rover and staff reductions in Rover cars had put a short term burden on BMW group results.

It repeated earlier forecasts that profitability at Rover, based on the current exchange rate of the pound, will be achieved in 2002.

Despite the first half slide the group repeated its forecast that full-year earnings will remain unchanged at 1998 levels as restructuring measures at Rover Cars start to have a positive impact on group earnings.

First-half group sales were roughly in line with analysts' expectations, rising 3.3% to 16.35bn euro (£10.96bn).

Sales of BMW cars totalled 8.393bn euro (£5.6bn) with Rover group sales at 2.947bn euro (£1.9bn). No comparative figures were given for BMW car and Rover group sales.

The company is holding out high hopes for the successful launch of Rover 75, successor to the R600/800 series, as well as restructuring measures making a major contribution to an improvement in BMW group results.

Reports from analysts suggested that Rover has secured 10,000 advance orders for the Rover 75 in the UK alone.

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