S&P upgrades BMW’s rating to A/A-1 image

Standard & Poor’s Ratings Services raised its long-term and short-term corporate credit ratings on German automaker BMW AG to ‘A/A-1′ from ‘A-/A-2′. The outlook is stable.

S&P believes that the lower cost base, combined with healthy global demand for luxury cars, should support BMW’s automotive EBIT margin in the 8%-10% range and credit ratios in line with the ‘A’ rating over the cycle.

“For 2012, we expect BMW to be able to generate about €3 billion of free operating cash flow and to maintain the ratio of FFO to debt in the three digits and well above the 50%-60% target.”

“We assume that BMW will maintain the dividend distribution at about a 30% payout ratio, even though the carmarker targets a 40% payout, which it plans to gradually attain but only apply in case of an extremely solid operating performance and cash generation. We do not factor in any significant acquisitions during the year, ” S&P said.

Deliveries of the namesake BMW brand rose 11 percent to 356,548 cars and sport-utility vehicles in the first three months of 2012, the Munich-based company said in a statement.

The maker of BMW, Mini and Rolls-Royce cars plans to grow faster than the overall auto market in 2012 on the back of new models, including the four-door 6-Series Gran Coupe and an updated version of the 7-Series luxury sedan, BMW said