Statement by Dr. Nicolas Peter, Member of the Board of Management of BMW AG, Finance, Conference Call Interim Report to 30th June 2018

  • development activities for the 8 Series model range and new X vehicles.

     

    We also expect capital expenditure to reach a new all-time high
    in 2018. The main reasons are the on-going construction of the
    plant in Mexico and the large number of model ramp-ups. This
    includes significantly increasing capacity for our X models. By
    the end of June, we had invested a total of 1.58 billion euros,
    mainly in property, plant and equipment. This amount is around 120
    million euros more than the previous year. The capex ratio was
    higher than in the first six months of 2017, at 3.3%. For the full
    year, we expect a ratio of around 5%.

     

    Despite these negative effects, pre-tax earnings totalled 6.04
    billion euros for the first six months and around 2.87 billion
    euros for the second quarter. Both the EBT margin of 11.5% for the
    quarter and 12.7% for the first half year were above our 10% target.

     

    Now let´s take a look at the individual segments, starting with
    the Automotive Segment. In the first half of 2018, we delivered
    more than 1.2 million vehicles to customers. All major sales
    regions reported growth. The slight downward trend in revenues is
    mainly due to currency headwinds and the intensely competitive
    environment. Adjusted for currency effects, revenues were up 2.4%.

     

    To make rapid progress in future technologies, we also continued
    to hire qualified staff in the second quarter. As I already
    mentioned, we once again increased research and development
    spending. At the same time, we are currently in the process of
    modernising and standardising our IT landscape.

     

    Despite higher costs for future projects, additional currency
    headwinds and intense competition, the Automotive Segment’s
    operating earnings remained high at 3.8 billion euros. In the
    second quarter, we were once again able to offset some of the high
    additional costs through efficiency measures. The EBIT margin of
    9.2% for the half year and 8.6% for the quarter are within our
    target range.

     

    Thanks to new models like the 5 Series, the BBA joint venture
    contributed around 100 million euros more to earnings than the
    previous year. Overall, BBA sales increased by around 15%, to more
    than 215,000 units. The model offensive has also had a positive
    impact on pricing. Pre-tax earnings for the first half year
    totalled around 4.34 billion euros. With a free cash flow of 1.94
    billion euros in the Automotive Segment at the half-year mark, we
    are on track to meet our target for the year of more than 3
    billion euros.

     

    The Financial Services Segment continued to perform well. Since
    the start of the year, the total portfolio has increased by 2.3%
    to more than 5.5 million contracts. More than 930,000 new
    contracts were concluded with customers in the first half of the
    year. The penetration rate was on a par with the previous year at
    47.4%. Second-quarter pre-tax earnings climbed 2.7% to 605 million euros.

     

    We also remain well positioned on the risk side. Our credit loss
    ratio remains low and residual values for our leasing portfolio
    have developed as expected. For all risks, we have made
    appropriate provisions.

     

    Let’s take a brief look at the Motorcycles Segment.

    Business development in the first half year was affected, among
    other things, by the ramp-ups for various model changes. In the
    year to the end of June, motorcycle sales therefore decreased
    slightly. Despite these effects, the second-quarter EBIT margin of
    14.9% was still on par with last year. The segment EBIT for the
    first six months totalled 175 million euros.

     

    Ladies and Gentlemen,

    Let’s now turn to our outlook. New products will generate
    positive sales momentum in the second half of the year. The 5
    Series is now fully available in China, where we’ve also just
    recently launched the new locally-produced X3. We will be doubling
    capacity for the X3 and X4 to around 400,000 units per year over
    the medium term. More major launches are planned up in the autumn
    and winter: with important, high margin models like the new X5,
    the X7, the new 8 Series and the Rolls-Royce Cullinan in the pipeline.

     

    We are on schedule with the WLTP transition, which is almost complete.

     

    Against this background, we are able to confirm our guidance for
    the current year. Of course, we continue to monitor the current
    trade situation very closely. If conditions deteriorate any
    further, we cannot rule out effects on our guidance.

     

    At Group level, we expect earnings before tax to be on par with
    the high level of the previous year. In the Automotive Segment –
    despite high RD costs and a significant headwind from the
    strong euro – we anticipate a slight increase in deliveries and
    revenues. We also expect the EBIT margin to remain within the
    range of 8 to 10%.

     

    In the Motorcycles Segment, bolstered by new products, we expect
    to see a slight increase in deliveries, with an EBIT margin in the
    range of 8-10%. And, in the Financial Services Segment, we are
    aiming for a return on equity above our target figure of 14%.

     

    Ladies and Gentlemen,

    Profitability, growth and innovation are the cornerstones of our
    business success. The BMW Group aspires to be a clear technology
    leader. To achieve this, we are using our financial resources to
    make investments targeted for future success.

     

    Our business environment will remain volatile. However,
    challenging conditions are always an opportunity to leverage
    competitive advantages and to capitalise on new ones. Our
    strategic focus remains clear and we continue to maintain our
    guidance for the full year.

     

    Thank you.