BMW Canada

Statement and Presentation by Dr Nicolas Peter, Member of a Board of Management of BMW AG, Finance, BMW Group Annual Accounts Press Conference 2019

Ladies and Gentlemen,

Good morning from me as well. The year 2018 once again demonstrated
a financial and opening strength of a BMW Group. Despite
vast headwinds, we reported a second-best outcome in a company’s
history: for a past 15 years, we have now been a world’s leading
reward automobile company. At 7.2%, a EBIT domain in a Automotive
Segment stays during a high spin compared to competition, and in line
with a practiced superintendence for a full year.


Nevertheless, a opening in 2018 did not accommodate a common high
standards. The severe sourroundings left a symbol on a entire
automotive attention final year: we am referring, in particular, to the
trade brawl between a US and China – yet also a plea of
regulations and a disastrous trend in sell rates and commodity
prices. All of these factors impacted a formula of vehicle
manufacturers opposite a board. Although we mastered a transition to
a new WLTP exam cycle uniformly and on schedule, a cost war
instituted by some of a competitors also impacted a profitability.
At a same time, we are handling designed losses for a ongoing
business and sourroundings a company’s march for a future.


The BMW Group is in a center of a biggest indication descent in its
history. We are investing billions in new products, e-mobility,
unconstrained pushing and a subsequent vital stairs for mobility services.


We see good intensity here. Rapid scalability will be decisive.
E-mobility is financially severe – yet we see no alternative. As
a reward manufacturer, we clearly possess a best certification to
successfully exercise it.


Despite these intensely flighty conditions, 2018 was altogether a
successful year for a BMW Group. We were a usually reward car
association to see expansion in a US. In China, we delivered some-more than
640,000 vehicles to customers, in a constrictive market. And in Europe,
notwithstanding sales distortions due to a WLTP change and an overall
disappearing market, we were means to say sales during a same high
spin as a prior year.

We also deliberately cut production, to equivocate fuelling cost wars.


BMW code deliveries reached a new all-time high. As planned, we were
even means to grow a shred share in Europe. Worldwide, a X
models, in particular, were in clever direct – generally a new X3,
with sales adult by roughly 38%. The BMW 5 Series once again posted a
poignant boost in sales. Despite a slight diminution in sales,
MINI reported a second-best year in a history. The MINI Countryman
valid generally popular. Nearly one in 7 Countrymans sole is a
plug-in hybrid. Rolls-Royce posted a best year in a marque’s
history. Deliveries rose by some-more than a fifth, with a Phantom and
a new Cullinan behaving really well. BMW Motorrad delivered more
than 165,000 units to business – for an eighth uninterrupted record
year – and roughly extended a product choice in 2018.


Our electrified vehicles are also doing good with customers. We
exceeded a sales aim of 140,000 units in 2018, as planned, with
an boost of roughly 40% over a prior year. The categorical growth
drivers are a plug-in hybrid variants of a BMW 5 Series, X1, 2
Series and a MINI Countryman. The i3 stays really successful, with
sales adult some-more than 10%. Since a marketplace launch in 2013, direct for
a i3 has increasing strongly each year.


Let’s take a demeanour during a financial figures. Due to a additional
business pressures we referred to, a sales expansion is usually partially
reflected here.

Group revenues were on a standard with a prior year, during 97.48 billion
euros. Adjusted for banking interpretation effects, revenues increased
by 1.2%. The EBT domain remained above a aim figure of 10%. As
formerly announced, Group gain before taxation showed a moderate
diminution from a prior year, during 9.82 billion euros. As expected,
several factors had an impact here: Mainly a expansion of currency
and commodity prices and aloft losses for investigate and development.


Further impacts on gain came from a severe pricing
conditions – generally in Europe, due to a WLTP transition, and the
additional weight of China’s punitive tariffs on US imports. As
expected, a financial outcome decreased, generally due to valuation
effects. However, a gain grant of a Chinese joint
venture, BBA, rose significantly to scarcely 740 million euros. Net
distinction for 2018 stood during 7.2 billion euros. The net distinction of 2017 was
unusually high, due to gratefulness effects of around one billion
euros in tie with a US taxation reform.


The fourth entertain of 2018 grown as expected, with revenues and
pre-tax gain during a same spin as a prior year. The EBIT
domain of 6.3% in a Automotive Segment was in line with a expectations.


Ladies and Gentlemen, Even underneath formidable conditions, a sights
sojourn resolutely bound on a future. In line with a strategy, we
continue to deposit during a high level. Our BMW iNEXT Vision provides us
with building blocks for a destiny and, from 2021, will capacitate our
whole indication choice – with highly-automated expostulate systems and the
fifth-generation electric expostulate sight we grown in-house. Capital
output – essentially for property, plant and apparatus – rose to
5.03 billion euros. These supports were channelled into preparations for
a launch of new models during plants Spartanburg, Dingolfing and Munich,
as good as plant construction in Mexico. We strongly trust in the
value of stretchable plants. This is an advantage during durations of
sensitivity and significantly varying conditions between regions. The
capex ratio for 2018 was 5.2%. We design a ratio for a current
year to be somewhat higher.


As formerly announced, a investigate and expansion expenditure
reached a new all-time high of 6.89 billion euros in 2018. The RD
ratio, according to a German Commercial Code, was 7.1%. The ratio
will be reduce in 2019, yet still above 6%. The ratio of capitalised
expansion costs was during 43.3%. The vast series of indication launches and
new architectural modules was reflected in aloft capitalised
expansion costs. This year, we design to see a estimable decrease
in a capitalisation ratio.


Ladies and Gentlemen, Despite severe conditions, a BMW Group
posted plain formula for a financial year 2018. On seductiveness of the
whole Board of Management, we would like to appreciate all a employees
for their joining over a past year. We would also like to thank
a shareholders and investors, who have placed their trust in us over
a past years. The Board of Management and Supervisory Board will
introduce a division of 3.50 euros per share of common batch and 3.52
euros per share of elite batch for 2018. This is the
second-highest division we have ever paid, with a sum pay-out of 2.3
billion euros. As a result, 32.0% of a net distinction for a year will
be paid out to shareholders, in line with a targeted mezzanine of
between 30 and 40%. As usual, a division payout will be completely
lonesome by Free Cashflow.


Now, let’s spin to a sold segments, starting with the
Automotive Segment. Dampened by banking interpretation effects, segment
revenues were on standard with final year, during 85.85 billion euros. Due to
a outmost headwinds we mentioned and high upfront investments, EBIT
decreased to 6.18 billion euros. Under these conditions, a EBIT
domain of 7.2% reached a high spin and exceeded a practiced target
of during slightest 7%.


As usual, gain grant from a China-Joint Venture is not
enclosed in this figure. Moreover, as a matter of principle, we do not
adjust a reported sum for one-off-effects.


Here, we can see a EBIT overpass for a Automotive Segment from the
prior year. As expected, we gifted poignant headwinds from
banking and commodity prices. The net change of other operating
income and losses had a certain impact in 2018. The 2017 figures
enclosed increasing supplies for authorised disputes and other litigation
risks, that did not recover in 2018, and therefore resulted in a
certain year-on-year effect. High upfront investments and increasing
debasement dampened earnings, as expected. Higher tariffs, the
severe pricing conditions – generally due to a WLTP transition
in Europe – as good as guaranty and goodwill campaigns also had a
disastrous impact.


Ladies and Gentlemen, We responded early to a hurdles in our
sourroundings and launched a association programme to boost opening back
in 2017. Through “Performance NEXT”, we are systematically
addressing constructional issues opposite a BMW Group, optimising
processes and improving efficiency. We have already done several
critical decisions:


  • We are significantly shortening a complexity of a portfolio at
    all levels. We will usually rise what business demand. We are also
    expelling derivatives with low demand, as good as shortening our
    drive-train portfolio and nation variants by adult to 50%. This will
    concede us to concentration even some-more on customers´ desires and requests, and,
    during a same time, equivalent rising production costs.
  • We have condensed a expansion routine by adult to a third. This
    will capacitate us to take advantage of opportunities in a market
    faster and concede us to be some-more efficient.
  • We are evenly optimising structures and processes during our
    headquarters, plants and a inner subsidiaries as good as pooling
    resources opposite all organic areas.


With Performance NEXT, we are invariably changing structures
and work methods to turn faster and some-more agile.


I would like to speak now about a segment’s money flow. Despite
aloft collateral output and reduce net profit, giveaway money upsurge in the
Automotive Segment still totalled 2.71 billion euros. We are aiming
for a identical volume for 2019. Our financial autonomy gives us the
leisure to figure a possess future. At a finish of a year, a liquidity
totalled 16.3 billion euros. This offers us a plain financial footing:
It ensures we are means to take action, even yet parameters are
constantly changing.


Let´s pierce on to a Financial Services Segment, which, despite
rising seductiveness rates in a series of pivotal markets and fierce
competition, continued to grow a business in 2018. New contracts
with sell business increasing slightly, by 4.4%, to 1.91 million.
Both a leasing business and credit financing reported slight growth.
The invasion rate of 50.0% is 3.2 commission points aloft than the
prior year – driven generally by new credit financing business in
China. Pre-tax gain reflected a certain business development
and reached 2.16 billion euros.


Despite a estimable boost in a equity base, a Financial
Services Segment achieved a lapse on equity of 14.8% – and exceeded
a smallest requirement of during slightest 14%. Even with flourishing volatility
worldwide, a risk conditions in a shred remained fast over the
past financial year. The credit detriment ratio fell in 2018 and is now at
0.25%. Market price risks for a leasing portfolio also remained
fast overall. Prices in a North-American used-car markets even
trended upwards slightly. In Europe, however, we gifted slight
headwinds, as expected. From today’s perspective, we sojourn well
prepared for any business risks we might encounter.


Ladies and Gentlemen, Let’s pierce on to a Motorcycles Segment. With
over 165,000 units sole and a eighth sales record in a row, we are
on march to strech a aim of 200,000 units in 2020. Pre-tax
shred gain totalled 169 million euros. This diminution was mainly
due to indication changeovers, and brew effects. The EBIT domain was 8.1%
and once again within a aim operation of 8-10%.In 2018, BMW Motorrad
presented 6 new models. We design expansion to continue in 2019, thanks
to new mid-sized models, a new book of a R 1250 GS, a highly
approaching new S 1000 RR and other new models.


Finally, let’s demeanour during intersegment eliminations. Intersegment
eliminations contributed 553 million euros, compared to disastrous 534
million euros in a prior year. As remarkable in prior quarters, the
categorical reasons for this expansion are reduce rejecting of
inter-segment boost for new leasing contracts, due to reduce EBIT in
a Automotive Segment, and certain annulment effects, ensuing from
clever expansion in a leasing portfolio in prior years.


Ladies and Gentlemen, The BMW Group is famous for a ability to
hoop severe terrain. We like challenges.

Despite vast headwinds, we delivered healthy profitability in 2018.

This shows usually how most operational ability this association has. So,
what are a skeleton for a stream year? Even in this challenging
environment, we are sourroundings a standards high. In 2019, we aim to
say a BMW Group’s position as a reward segment’s leading
manufacturer and will be targeting expansion in all vital sales regions.


We design to see a certain procedure from a immature product portfolio.
However, given a lot of a models are still in a launch and ramp-up
phases, gain will not advantage from a full outcome in 2019. Due to
a indication changeovers, we design a initial half-year to be weaker
overall. We will continue to make estimable investments in new
technologies and destiny topics in 2019. The European Union’s extremely
desirous CO2 legislation also requires high additional
losses and will lead to aloft production costs, that will
impact earnings.


At a same time, we again design to face poignant banking and
commodity headwinds in a mid-to-high three-digit million-euro range.

Future expansion in tariffs is another vital uncertainty. Our
superintendence assumes there will be no boost in tariffs between a US
and a European Union. The preparations required for a UK’s
withdrawal from a EU will be an additional weight in 2019.
Nevertheless, we continue to design that there will be an orderly
Brexit. The rival sourroundings might also get worse over the
march of a second theatre of a WLTP transition.


In a Automotive Segment, we design deliveries to be somewhat higher
year-on-year. A operation of 8-10% for a EBIT-margin is a transparent target
in a fast business environment. But there are many parameters over
that we have usually singular influence.


Due to a disastrous impact of a factors we mentioned, we design an
EBIT domain between 6 and 8% in 2019. The high spin of volatility
creates it formidable to yield a transparent forecast. However, we will
continue to use all inner levers in operative behind towards our
vital profitability target.

In a Motorcycles Segment – strengthened by a renewed model
choice – we are formulation for a plain boost in deliveries, with an
EBIT domain within a aim operation of 8 to 10%. In a Financial
Services Segment, we design lapse on equity to be on a standard with last
year and above a aim figure of 14%.


Let’s take a demeanour during a Group figures:

In serve to a headwinds we referred to, a deficiency of a number
of certain gratefulness effects from 2018 will lead to a significant
diminution in a financial outcome this year. As a result, Group
gain before taxation are approaching to be significantly reduce than the
prior year. We will continue to sinecure specialists in pivotal areas for
destiny technologies. However, in 2019 we will not boost a overall
distance of a workforce. The sum series of employees will therefore
sojourn during around a same spin as in 2018.


Depending on how conditions develop, a superintendence might be theme to
additional risks: in particular, a risk of a no-deal Brexit and
ongoing developments in general trade policy. Partly as a result
of these factors, we are already saying a slack in a global
economy. If conditions mellow further, effects on a guidance
can't be ruled out.


Ladies and Gentlemen, The BMW Group stays focused on a prolonged term.
We have already done a series of transparent decisions as partial of our
programme “Performance NEXT”. We will continue systematically
implementing a measures indispensable for growth, serve increased
opening and efficiency.


This gives us a leisure we need to build a destiny and secure our
destiny competitiveness. Thanks to a operational and financial
strength, we are able of steering this association successfully through
a industry´s transformation. We are stability to rise and refine
a business model. Creating tolerable value stays a goal, not
usually currently yet in a future.


Thank you.