BMW Group’s operational performance on course

Munich. Within a challenging market environment, the
BMW Group has started the financial year 2019 in line with
expectations in operational terms. Contrary to the prevailing trend in
the sector, the Group’s attractive and significantly younger model
range enabled the company to set a new record in terms of deliveries
to customers in the first quarter, thereby expanding its market share
of the premium-segment in key regions. These positive developments
were accompanied, however, by increasing downward pressure on pricing
in some markets.

 

“The Group’s new first-quarter sales record proves that we are
putting the right products on the roads, thereby attracting new
customers, as well as inspiring existing clients. In operational
terms, we remain firmly on course and expect business to benefit from
tailwinds, especially in the second half of the year, as numerous new
models become available. At the same time, we are experiencing the
impact of high levels of expenditure in numerous areas affecting the
entire automotive sector. In addition, it has also been necessary to
recognise a provision relating to ongoing proceedings of the EU
Commission,” stated Harald Krüger, Chairman of the
Board of Management of BMW AG, on Tuesday in Munich. “Within this
challenging environment, we will remain true to the BMW way of doing
things. We are fully focused on our roadmap for future mobility and
the rigorous implementation of our Strategy NUMBER ONE  NEXT”.

 

This means, the BMW Group is committed to implementing even faster
processes and leaner structures in order to achieve greater
efficiency. The aim is to make sure, the BMW Group has the financial
strength required to influence and decisively shape the world of
individual premium mobility moving into the next decade.

 

E-mobility continues to gather momentum

 

The BMW Group is already a leading provider of electric mobility and
expects to have more than half a million of its
state-of-the-art electrified vehicles on the roads by
the end of the year. The broad range of electrified vehicles offered
by the BMW Group remained highly popular throughout the first three
months of 2019. Deliveries of the BMW i3 continued
their upward trend, climbing by 16.2% to 9,227 units compared to the
same three-month period one year earlier. These figures represent by
far the most successful first quarter for the innovative BMW i3 since
its launch in 2013.

 

The BMW Group’s plug-in hybrid vehicles are also in high demand. For
instance, more than a quarter of all BMW 2 Series
Active Tourers delivered to customers are electrified, while
almost 20% of all MINI Countryman sold are equipped
with a plug-in hybrid drivetrain. In Norway, one of the world’s
leading markets for electrified vehicles, all-electric and plug-in
hybrid vehicles now account for around three quarters
of all BMW and MINI deliveries.

 

At the beginning of March, the revised plug-in hybrid versions of the
BMW 3, BMW 7 and BMW X5 Series as well as the new BMW X3 with their
extended electric range were showcased at the
Geneva Motor Show. In April, the revised plug-in hybrid version of the
BMW X1 was launched in Shanghai as an
extended-wheelbase version produced locally for the Chinese market. By
the end of the coming year, the BMW Group will have more than
ten
new or revised models equipped with fourth-generation
(“Gen 4”) electrified technology on the market.

 

From the end of 2019, these will include the all-electric
MINI Electric manufactured at the Oxford plant and,
from 2020, the BMW iX3, which will be produced in
Shenyang, China for the world market. Together with the pioneering BMW
i3, the BMW i4 and the BMW iNEXT,
the Group will have five all-electric models on the
market by 2021 and the number is scheduled to rise to at least twelve
models by 2025. Including the rapidly growing range of plug-in
hybrids, the BMW Group’s product portfolio will then comprise at least
25 electrified models.

 

Openness to new technologies is key

 

“Openness in technology is a prerequisite in order to meet the
various regulatory and customer requirements in different markets.
This is especially true given that the introduction of alternative
drivetrains is progressing at a different pace in the various regions
of the world,” emphasised Krüger. “Technological
openness also means that we will continue to improve the efficiency of
our combustion engines, while also pushing forward our e-mobility
strategy with both all-electric vehicles and plug-in hybrids and
investing in new technologies such as fuel cells,” he continued.

 

On its way toward securing the mobility of the future, the BMW Group
incurred substantial upfront expenditure in the first quarter 2019. As
expected, expenditure in this area once again exceeded the previous
year’s high level. First-quarter research and
development
expenses totalled € 1,396 million, 8.4% up on the
previous year. Investments in property, plant and
equipment climbed by more than one third to € 999 million (2018: € 734
million; +36.1%). The increase mainly related to the modernisation and
flexibilisation of plant structures as well as the construction of the
Group’s new plant in Mexico. The high proportion of electrified
vehicles also contributes to higher manufacturing costs. Unfavourable
exchange rate factors and higher raw material prices also had a
dampening effect on earnings in the period from January to March 2019.
An expense of approximately € 1.4 billion was recognised for a
provision on the basis of the Statement of Objections received from
the EU Commission in connection with ongoing antitrust proceedings.
This provision reduced the Automotive segment’s EBIT margin by
approximately seven percentage points compared to the previous year’s
first quarter.

 

BMW Group to contest EU Commission allegations

As communicated on 5 April 2019, the provision was recognised on the
basis of the Statement of Objections, which leads the BMW Group to
conclude that it is probable that the EU Commission will issue a
significant fine. In accordance with International Financial Reporting
Standards, the situation triggers a requirement to recognise a
provision. The review of the Statement of Objections and the
inspection of related files will take some time. As a result, it is
not currently possible to fully evaluate the financial outcome.
However, the BMW Group has made it clear that if necessary it will
contest the EU Commission’s allegations with all the legal
means at its disposal
.

 

The BMW Group regards these proceedings as an attempt to equate the
permissible coordination of industry positions regarding the
regulatory framework with unlawful cartel agreements. Based on current
knowledge, the EU Commission is investigating whether German
automobile manufacturers cooperated in technical working groups to
restrict competition in the development and rollout of
emission-reduction technologies. From the BMW Group’s perspective,
this situation cannot be compared with cartel investigations relating,
for example, to territorial or price-fixing agreements.

 

Fundamentally, the participating engineers from the manufacturers’
development departments were concerned with improving exhaust gas
treatment technologies. Unlike cartel agreements, the whole industry
was aware of these discussions, which did not involve any so-called
secret agreements and did not intend any detriment to either customers
or suppliers in any shape or form.

 

Group result influenced by provision

 

In the first quarter 2019, the BMW Group delivered
605,333 BMW, MINI and
Rolls-Royce premium brand vehicles to
customers, a new record for the opening quarter of a year (2018:
604,629 units; +0.1%). This positive development was influenced to a
large extent by the contribution made by the BMW Brilliance Automotive
joint venture in China. At € 22,462 million, Group
revenues
were at a similar level to the previous year (2018:
€ 22,665 million; -0.9%). Influenced by the adverse factors described
above, including the provision recognised in connection with the EU
proceedings, profit before financial result (EBIT)
for the first quarter amounting to € 589 million was significantly
down on the previous year (2018: € 2,707 million; -78.2%).
Group profit before tax (EBT) amounted to € 762
million (2018: € 3,139 million; -75.7%). The Group’s EBT
margin
came in at 3.4% (2018: 13.8%). Group net
profit
amounted to € 588 million (2018: € 2,282 million; -74.2%).

 

“Our aspirations remain high: we wish to grow both sustainably and
profitably. With our Performance NEXT programme, we are taking
pro-active measures to offset numerous headwinds and have already made
a number of far-reaching decisions. Discipline and a clear focus on
rigorous implementation of our strategy remain the key criteria,”
commented Nicolas Peter, Member of the Board of
Management of BMW AG, Finance. “We see innovation leadership and
profitability as crucial to retain our leading position in the
automotive industry. This is why we continue to invest in the future.
The upfront expenditure we are incurring today to further develop
electric mobility and autonomous driving is a prerequisite for
tomorrow’s success.”

 

One of the outcomes of Performance NEXT, for instance, is that
development times for new vehicle models will be
reduced by as much as one third. On the product side, from 2021
onwards, up to 50% of today’s drivetrain variants
will be eliminated in the transition to flexible vehicle
architectures. Moreover, the model portfolio is regularly assessed
with a view to identifying additional potential for reducing
complexity
. Synergy and efficiency opportunities in both
indirect purchasing and in materials and production costs are also
being leveraged. By the end of 2022, the Group expects to realise
potential efficiency savings in excess of € 12 billion.

 

Automotive segment particularly affected by provision and
other high expenditure

 

The negative factors described above particularly affected
Automotive segment earnings in the first quarter.
At € 19,213 million, Group revenues for the period
from January to March were similar to the previous year (2018:
€ 19,326 million; -0.6%). Due to the negative effects referred to
above, EBIT finished at a loss of € 310 million
(2018: profit of € 1,881 million). The EBIT margin
therefore came in at -1.6% (2018: +9.7%). Excluding the effect of the
provision, the EBIT margin was +5.6%. The loss before
tax
amounted to € 27 million (2018: profit before tax of € 2,281 million).

 

Worldwide, the BMW brand delivered 519,307 units
(2018: 517,447; +0.4% units) to customers, its best first-quarter
result to date. The BMW X models were particularly popular, above all
the BMW X3 which has also been produced locally in China since the
summer of 2018. The number of deliveries of this vehicle more than
doubled in the first quarter.

 

The MINI brand delivered 84,820 units (-1.8%) to
customers worldwide during the three-month period under report. The
revised version of the MINI Clubman had its world debut at the
Shanghai Auto Show in April. Preparations are also continuing for the
launch of the new all-electric MINI in the course of the current year.
Production is scheduled to start at the Group’s Oxford plant at the
end of the year.

 

Following the best sales result in its 115-year history in 2018, the
Rolls-Royce brand remained firmly on growth course in
the first quarter 2019. Worldwide, 1,206 Rolls-Royce brand vehicles
were delivered to customers (+49.4%), with growth recorded across all
regions. Demand for all Rolls-Royce models remains high, driven in
particular by the highly popular Phantom. Customer interest in the
Cullinan is also exceptionally strong. Accordingly, the order books
are full to the brim well into the fourth quarter of the current year.

 

BMW Group strives for evenly balanced deliveries worldwide

 

The BMW Group remains committed to its strategy of achieving a
well-balanced distribution of deliveries worldwide, leveraging its
highly flexible production, sales and marketing structures to even out
fluctuating demand between individual regions.

 

In Europe, first-quarter deliveries of 270,950 units
were at a similar level to one year earlier (2018: 270,725; +0.1%). In
Germany, the BMW Group recorded solid growth, with deliveries up to
72,592 units (2018: 68,294 units: +6.3%).

 

First-quarter deliveries of BMW, MINI and Rolls-Royce brand vehicles
in Asia rose slightly to 217,200 units (2018: 212,693
units; + 2.1%). China contributed significantly to this performance,
with deliveries of the Group’s three brands up by 10.2% to a total of
168,663 units (2018: 153,094 units).

 

In the Americas region, deliveries were slightly
down to 104,215 units (2018: 106,348 units; -2.0%) between January and
March. The figure for the USA also declined slightly to 83,158 units
(2018: 84,630 units; -1.7%).

 

Motorcycles segment increases revenues and earnings
significantly

 

BMW Motorrad increased deliveries of
its motorcycles and maxi-scooters by 7.7% to 38,606 units (2018:
35,858 units), setting a new first-quarter record for the eighth year
in succession. Revenues grew by 11.8% to € 586
million (2018: € 524 million). EBIT also improved
significantly, rising to € 89 million for the three-month period under
report (2018: € 77 million; +15.6%). The first-quarter EBIT
margin
came in at 15.2% (2018: 14.7%).

 

Successful start to year for Financial Services segment

 

The contract portfolio under management within the
Financial Services segment edged up by 0.5% to
5,735,975 contracts at the end of the reporting period (31 December
2018: 5,708,032 contracts). During the first quarter, 469,624 (2018:
451,908 contracts: +3.9%) new credit financing and lease
contracts
were signed with retail customers.
Revenues grew by 8.9% to € 7,146 million (2018: €
6,561 million). Profit before tax improved
significantly, rising by 13.4% to € 627 million (2018: € 553 million).

 

Workforce at previous year’s level

 

The BMW Group’s workforce comprised 134,849 employees at the end of
the first quarter, similar to the level at 31 December 2018 (134,682;
+0.1%). The Group continues to recruit skilled workers and IT
specialists on a selective basis to work on future-focussed topics
including digitalisation, autonomous driving and electric mobility.
Nevertheless, the target for 2019 is to keep the workforce at the
previous year’s level.

 

BMW Group reaffirms targets for current financial year

 

The BMW Group sets itself ambitious targets, even in politically and
economically turbulent times. With its young product
portfolio
, further rejuvenated by new models, the Group aims
to remain the world’s leading automotive manufacturer in the premium
segment, underpinned by growth in all major sales regions. In view of
the various model changes currently in progress, business is expected
to see a strong upturn in the second half of the current financial year.

 

The BMW Group will continue to invest substantial amounts in new
technologies and the mobility of the future in 2019. Costs are also
being driven up in other areas, including the significantly higher
cost of complying with stricter carbon emission legislation. Against
this background, rising manufacturing costs are
likely to have a dampening effect on earnings. Moreover, unfavourable
currency factors and higher raw materials prices are expected to have
a medium to high three-digit million negative impact. At the same
time, the ongoing issue of international trade conflicts remains a
source of uncertainty.

 

Taking all these factors into account, the BMW Group is confident of
its ability to achieve volume growth in the Automotive
segment
, where it is targeting a slight increase in the
number of deliveries to customers in 2019. Within a stable business
environment, an EBIT margin in the range of 8 to 10% remains the
ambition for the BMW Group. However, its ability to influence
underlying conditions is limited. Without the effect of the provision
for the ongoing antitrust proceedings amounting to € 1.4 billion, the
target range for the EBIT margin of 6-8% has not changed. However,
since the provision has a negative impact of 1.5 percentage points on
the EBIT margin, the BMW Group is expecting a margin in the Automotive
segment for 2019 between 4.5 and 6.5%.

 

With its rejuvenated model range, the Motorcycles
segment
is forecast to achieve a solid increase in deliveries
to customers. As in 2018, the segment EBIT margin is expected to be
within the target range of 8 to 10%.

 

In addition to the negative earnings effects referred to above, the
fact that some positive valuation effects recorded in 2018 will not be
repeated in 2019 will result in a significant decline in the Group’s
financial result. Group profit before tax is
therefore also expected to be well below the previous year’s level.

 

Forecasts for the current year are based on the assumption that
worldwide economic and political conditions will not
change significantly. Any deterioration in conditions could have a
negative impact on the outlook. The BMW Group will vigorously continue
to implement key measures to drive growth on the one hand and improve
performance and efficiency on the other, thereby creating the headroom
to enable it to help shape the future and secure its
own competitiveness going forward. Its operational and financial
strength place the BMW Group in an excellent position to play a key
role in shaping the current transformation of the automotive sector
and enhance its leading role in the automotive industry.

 

* * *

 

The BMW Group – an Overview

1st quarter
 2019

1st quarter
 2018

Change in %

Deliveries to customers

    

Automotive

units

605,333

604,629

0.1

thereof: BMW

units

519,307

517,447

0.4

 MINI

units

84,820

86,375

-1.8

 Rolls-Royce

units

1,206

807

49.4

Motorcycles

units

38,606

35,858

7.7

 

 

 

 

 

Workforce
1                          (compared to
31.12.2018)

134,849

134,682

0.1

 

 

 

 

 

EBIT margin Automotive segment
3

%

-1,6

9,7

-11.3 % pts.

EBIT margin Motorcycles segment
3

%

15,2

14,7

+0.5 % pts.

Pre-tax return on sales
3

%

3,4

13,8

-10.4 % pts.

 

 

 

 

 

Revenues
3

€ million

22,462

22,665

-0.9

thereof: Automotive

€ million

19,213

19,326

-0.6

Motorcycles

€ million

586

524

11.8

Financial
Services3

€ million

7,146

6,561

8.9

Other Entities

€ million

1

2

-50.0

Eliminations3

€ million

-4,484

-3,748

-19.6

 

 

 

 

 

Profit before financial result (EBIT)
3

€ million

589

2,707

-78.2

thereof: Automotive

€ million

-310

1,881

Motorcycles

€ million

89

77

15.6

Financial
Services3

€ million

648

561

15.5

Other Entities

€ million

4

9

-55.6

Eliminations3

€ million

158

179

-11.7

 

 

 

 

 

Profit before tax (EBT)
3

€ million

762

3,139

-75.7

thereof: Automotive

€ million

-27

2,281

Motorcycles

€ million

87

78

11.5

Financial
Services3

€ million

627

553

13.4

Other Entities

€ million

-58

70

Eliminations3

€ million

133

157

-15.3

 

 

 

 

 

Income taxes
3

€ million

-218

-857

74.6

Net profit for the year
3,4

€ million

588

2,282

-74.2

Earnings per share
2,3

 €

0.85/0.85

3.44/3.44

-75.3/-75.3

1 Excluding dormant employment contracts, employees in the
work and non-work phases of pre-retirement part-time working
arrangements and low wage earners

2 Earnings per share of common stock/preferred stock

3 Prior year figures adjusted due to first-time application
of revised IFRS 16, see note [5] to the Group Financial Statements as
of 31 December 2018.

4 Value for Q1 2019 including € 44 million from
discontinued operations

 

 

For queries, please contact:

 

Corporate Communications

 

Max-Morten Borgmann, Corporate Communications

Telephone:
+49 89 382-24118
, Max-Morten.Borgmann@bmwgroup.com

 

Mathias Schmidt, Head of Corporate and Culture Communications

Telephone:
+49 89 382-24544
, Mathias.M.Schmidt@bmw.de

 

Internet: www.press.bmwgroup.com

E-mail: presse@bmwgroup.com

 

 

The BMW Group

 

With its four brands BMW, MINI, Rolls-Royce and BMW Motorrad, the BMW
Group is the world’s leading premium manufacturer of automobiles and
motorcycles and also provides premium financial and mobility services.
The BMW Group production network comprises 30 production and assembly
facilities in 14 countries; the company has a global sales network in
more than 140 countries.

In 2018, the BMW Group sold over 2,490,000 passenger vehicles and
more than 165,000 motorcycles worldwide. The profit before tax in the
financial year 2018 was € 9.815 billion on revenues amounting to
€ 97.480 billion. As of 31 December 2018, the BMW Group had a
workforce of 134,682 employees.

The success of the BMW Group has always been based on long-term
thinking and responsible action. The company has therefore established
ecological and social sustainability throughout the value chain,
comprehensive product responsibility and a clear commitment to
conserving resources as an integral part of its strategy.

 

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