Ladies and Gentlemen,
Good morning.
The BMW Group performed well in the first quarter – fulfilling all
our expectations. Our positive operating performance shows: our
strategy is generating strong results.
Group earnings again reached the same high level as last year. The
EBIT margin in the Automotive Segment rose to 9.7%, despite higher
RD costs. We are well positioned in our target corridor of 8-10%.
Segment EBIT is on par with the previous year, despite high upfront
investments and headwinds from currency and commodity prices. We
already announced at the Annual Press Conference that our RD
spending for this year will reach a new record high.
We are investing in future projects and expanding our innovation
leadership. RD costs increased by over 100 million euros in the
first quarter. As planned, we were able to partially offset this
additional expenditure with internal efficiency improvements. However,
as already announced in March, we will see a significant increase in
costs in the second half of the year.
This is due to the large number of vehicle launches and continued
upfront investments in future technologies. The negative impact of
currency and commodity prices dampened earnings. For the full year, we
expect a headwind in the mid to high three-digit million-euro-range,
due to various economic and political conditions. As part of the
transition to the new IFRS 15 accounting standard, certain comparative
figures from the previous year had to be adjusted. You will find more
details on this in the current Quarterly Report.
First, let’s take a closer look at the Group figures.
First-quarter revenues decreased to 22.69 billion euros. Adjusted for
negative currency effects, they were approximately on par with the
previous year. Group earnings before tax totalled 3.17 billion euros –
which is on par with the high level of the previous year. The EBT
margin was 13.9%. The higher financial result reflects the positive
earnings contribution of our Chinese joint venture and valuation
effects from the acquisition of DriveNow, among other factors. In line
with this strong business performance, Group net profit rose slightly
to 2.30 billion euros.
Ladies and Gentlemen,
We are strengthening our product portfolio this year: This includes
renewing and expanding our X family, as well as our product offensive
in the luxury segment. When it comes to future technologies, we are
also competing in the Champions League: Our newly-opened Autonomous
Driving Campus and our Battery Cell Competence Centre underline this
commitment. Flexibility is an essential component of this. It is what
makes us robust and competitive. As part of our continuing strategic
development, we invested almost 130 million euros more in the first
quarter than in the same period of 2017 – a total investment of around
734 million euros.
As a result, the capex ratio rose to 3.2%. For the full year, we
expect a ratio of up to 5%. We will therefore continue to remain in
our long-term target corridor. As announced, RD expenditure also
remained at a high level and totalled 1.27 billion euros for the year
to the end of March. Due to high upfront investments in new products
and technologies, we expect this figure to reach around 7 billion
euros over the course of the year. The RD ratio currently stands
at 5.6%. The figure for the full year 2018 will be between 6.5 and 7%.
Let’s take a look at the Automotive Segment.
In the first quarter of 2018, global sales performed well, increasing
by 3.0%.
The strong euro meant that segment revenues were slightly lower than
the previous year. Adjusted for currency effects, revenues were up
1.5%. The segment EBIT of 1.88 billion euros was on par with the
previous year – despite higher RD costs and headwinds from
currency and commodity prices. This was offset somewhat by positive
effects from volume/mix/market and efficiency improvements. The
financial result once again contributed to positive pre-tax earnings.
Our Chinese joint venture, BBA, increased its earnings contribution to
240 million euros. Sales climbed 20% in the year to the end of March.
The X1 and the new 5 Series in particular are highly popular.
The valuation effect from the acquisition of DriveNow also had a
positive impact. This was offset by a similarly high positive
valuation effect from the previous year in connection with new
investors acquiring a stake in the mapping service HERE. Pre-tax
earnings amounted to 2.28 billion euros.
Ladies and Gentlemen,
These figures underline that our core business is built on a very
solid foundation. At the end of the first quarter, despite a planned
significantly higher accumulation of working capital, free cash flow
stood at 302 million euros. For the full year, we continue to target a
free cashflow of more than 3 billion euros.
In the Financial Services Segment, the total portfolio of customer
financing contracts reached almost 5 million. In the first quarter,
47.3% of all BMW Group new vehicles were leased or financed by the
Financial Services Segment. Almost 452,000 new contracts were
concluded with retail customers. The segment’s risk situation remained
stable. Overall, used-car prices are trending downward slightly in
international markets, as expected. We place a strong emphasis on
proactive risk management. We evaluate our portfolio on a regular
basis, so that we can make adequate provisions for our business risks
at all times.
Let’s move on to the Motorcycles Segment.
Almost 36,000 motorcycles were delivered to customers in the first
three months of 2018. Revenues were 15.5% lower than the previous
year, at 524 million euros. Due to the ramp-up of new models,
including the impact of various model changeovers, total production
declined in the first quarter. Consequently, sales to the retail
organisation – which form the basis for revenue recognition –
decreased. Currency effects also had a negative impact.
As a result, the Segment’s operating earnings for the first quarter
were lower than the previous year. The EBIT margin was 14.7%.
Now to the outlook for the full year.
As long as political and economic conditions do not deteriorate
significantly, we expect positive business development in 2018. We are
targeting Group earnings before tax at least on par with the high
level of the previous year. In late March, BMW AG and Daimler AG
signed an agreement to combine their mobility services.
If approved by the relevant authorities in the course of this year,
the formation of the joint venture will trigger a one-time valuation
and earnings effect in the BMW AG’s group financial statement and thus
lead to an adjustment of the company’s guidance. Under these
circumstances, pre-tax earnings on Group level would increase slightly
in 2018 compared with the previous year.
In the Automotive Segment, we anticipate a slight increase in
deliveries and revenues for 2018. Despite high upfront investments, we
still aim to keep the EBIT margin between 8 and 10%. We now expect a
slight increase in deliveries in the Motorcycles Segment in 2018. Our
target for the EBIT margin remains unchanged at between 8 and 10%. In
the Financial Services Segment, we expect return on equity to exceed
our new target figure of 14%.
Ladies and Gentlemen,
The BMW Group is on course to meet its guidance for the full year. In
2018, we will continue to make important strategic decisions. And, as
you know: Whatever we start is well thought through, and we implement
it sustainably. In such a volatile environment, our core business
delivers the highest level of performance from one quarter to the
next. This gives us the freedom we need to continue investing in our future.
Thank you.
Consumption and Emission Data.
BMW X1:
Fuel consumption in l/100 km (combined): 6.5-4.6
CO2 emissions in g/km (combined): 149-120
The fuel consumption, CO2 emissions, power consumption and operating
range figures were determined according to the European Regulation
(EC) 715/2007 in the version applicable. The figures refer to a
vehicle with basic configuration in Germany and the range shown
considers the different sizes of the selected wheels/tyres and the
selected items of optional equipment.
Further information on official fuel consumption figures and specific
CO2 emission values of new passenger cars is included in the following
guideline: ‘Leitfaden über den Kraftstoffverbrauch, die CO2-Emissionen
und den Stromverbrauch neuer Personenkraftwagen’ (Guideline for fuel
consumption, CO2 emissions and electric power consumption of new
passenger cars), which can be obtained free of charge from all
dealerships and at https://www.dat.de/en/offers/publications/guideline-for-fuel-consumption.html.