Ladies and Gentlemen,
Good morning from me as well. The year 2018 once again demonstrated
the financial and performance strength of the BMW Group. Despite
massive headwinds, we reported the second-best result in our company’s
history: for the past 15 years, we have now been the world’s leading
premium car company. At 7.2%, our EBIT margin in the Automotive
Segment remains at a high level compared to competition, and in line
with our adjusted guidance for the full year.
Nevertheless, our performance in 2018 did not meet our usual high
standards. The challenging environment left its mark on the entire
automotive industry last year: I am referring, in particular, to the
trade dispute between the US and China – but also the challenge of
regulations and the negative trend in exchange rates and commodity
prices. All of these factors impacted the results of vehicle
manufacturers across the board. Although we mastered the transition to
the new WLTP test cycle smoothly and on schedule, the price war
initiated by some of our competitors also impacted our profitability.
At the same time, we are managing planned expenses for our ongoing
business and setting our company’s course for the future.
The BMW Group is in the middle of the biggest model offensive in its
history. We are investing billions in new products, e-mobility,
autonomous driving and the next strategic steps for mobility services.
We see great potential here. Rapid scalability will be decisive.
E-mobility is financially challenging – but we see no alternative. As
a premium manufacturer, we clearly possess the best credentials to
successfully implement it.
Despite these extremely volatile conditions, 2018 was overall a
successful year for the BMW Group. We were the only premium car
company to see growth in the US. In China, we delivered more than
640,000 vehicles to customers, in a contracting market. And in Europe,
despite sales distortions due to the WLTP change and an overall
declining market, we were able to maintain sales at the same high
level as the previous year.
We also deliberately cut production, to avoid fuelling price wars.
BMW brand deliveries reached a new all-time high. As planned, we were
even able to grow our segment share in Europe. Worldwide, our X
models, in particular, were in strong demand – especially the new X3,
with sales up by almost 38%. The BMW 5 Series once again posted a
significant increase in sales. Despite a slight decrease in sales,
MINI reported the second-best year in its history. The MINI Countryman
proved especially popular. Nearly one in seven Countrymans sold is a
plug-in hybrid. Rolls-Royce posted the best year in the marque’s
history. Deliveries rose by more than a fifth, with the Phantom and
the new Cullinan performing very well. BMW Motorrad delivered more
than 165,000 units to customers – for an eighth consecutive record
year – and substantially enhanced its product line-up in 2018.
Our electrified vehicles are also doing well with customers. We
exceeded our sales target of 140,000 units in 2018, as planned, with
an increase of almost 40% over the previous year. The main growth
drivers are the plug-in hybrid variants of the BMW 5 Series, X1, 2
Series and the MINI Countryman. The i3 remains very successful, with
sales up more than 10%. Since its market launch in 2013, demand for
the i3 has increased strongly every year.
Let’s take a look at our financial figures. Due to the additional
business pressures I referred to, our sales growth is only partially
reflected here.
Group revenues were on a par with the previous year, at 97.48 billion
euros. Adjusted for currency translation effects, revenues increased
by 1.2%. The EBT margin remained above our target figure of 10%. As
previously announced, Group earnings before tax showed a moderate
decrease from the previous year, at 9.82 billion euros. As expected,
various factors had an impact here: Mainly the development of currency
and commodity prices and higher expenses for research and development.
Further impacts on earnings came from the challenging pricing
situation – especially in Europe, due to the WLTP transition, and the
additional burden of China’s punitive tariffs on US imports. As
expected, our financial result decreased, mainly due to valuation
effects. However, the earnings contribution of our Chinese joint
venture, BBA, rose significantly to nearly 740 million euros. Net
profit for 2018 stood at 7.2 billion euros. The net profit of 2017 was
exceptionally high, due to valuation effects of around one billion
euros in connection with the US tax reform.
The fourth quarter of 2018 developed as expected, with revenues and
pre-tax earnings at the same level as the previous year. The EBIT
margin of 6.3% in the Automotive Segment was in line with our expectations.
Ladies and Gentlemen, Even under difficult conditions, our sights
remain firmly fixed on the future. In line with our strategy, we
continue to invest at a high level. Our BMW iNEXT Vision provides us
with building blocks for the future and, from 2021, will enable our
entire model line-up – with highly-automated drive systems and the
fifth-generation electric drive train we developed in-house. Capital
expenditure – primarily for property, plant and equipment – rose to
5.03 billion euros. These funds were channelled into preparations for
the launch of new models at plants Spartanburg, Dingolfing and Munich,
as well as plant construction in Mexico. We strongly believe in the
value of flexible plants. This is an advantage during periods of
volatility and significantly varying conditions between regions. The
capex ratio for 2018 was 5.2%. We expect the ratio for the current
year to be slightly higher.
As previously announced, our research and development expenditure
reached a new all-time high of 6.89 billion euros in 2018. The RD
ratio, according to the German Commercial Code, was 7.1%. The ratio
will be lower in 2019, but still above 6%. The ratio of capitalised
development costs was at 43.3%. The large number of model launches and
new architectural modules was reflected in higher capitalised
development costs. This year, we expect to see a substantial decrease
in the capitalisation ratio.
Ladies and Gentlemen, Despite challenging conditions, the BMW Group
posted solid results for the financial year 2018. On behalf of the
entire Board of Management, I would like to thank all our employees
for their commitment over the past year. We would also like to thank
our shareholders and investors, who have placed their trust in us over
the past years. The Board of Management and Supervisory Board will
propose a dividend of 3.50 euros per share of common stock and 3.52
euros per share of preferred stock for 2018. This is the
second-highest dividend we have ever paid, with a total pay-out of 2.3
billion euros. As a result, 32.0% of our net profit for the year will
be paid out to shareholders, in line with our targeted corridor of
between 30 and 40%. As usual, our dividend payout will be completely
covered by Free Cashflow.
Now, let’s turn to the individual segments, starting with the
Automotive Segment. Dampened by currency translation effects, segment
revenues were on par with last year, at 85.85 billion euros. Due to
the external headwinds I mentioned and high upfront investments, EBIT
decreased to 6.18 billion euros. Under these conditions, the EBIT
margin of 7.2% reached a high level and exceeded our adjusted target
of at least 7%.
As usual, earnings contribution from our China-Joint Venture is not
included in this figure. Moreover, as a matter of principle, we do not
adjust our reported figures for one-off-effects.
Here, you can see the EBIT bridge for the Automotive Segment from the
previous year. As expected, we experienced significant headwinds from
currency and commodity prices. The net balance of other operating
income and expenses had a positive impact in 2018. The 2017 figures
included increased provisions for legal disputes and other litigation
risks, which did not recur in 2018, and therefore resulted in a
positive year-on-year effect. High upfront investments and increasing
depreciation dampened earnings, as expected. Higher tariffs, the
challenging pricing situation – especially due to the WLTP transition
in Europe – as well as warranty and goodwill campaigns also had a
negative impact.
Ladies and Gentlemen, We responded early to the challenges in our
environment and launched a company programme to boost performance back
in 2017. Through “Performance NEXT”, we are systematically
addressing structural issues across the BMW Group, optimising
processes and improving efficiency. We have already made several
important decisions:
- We are significantly reducing the complexity of our portfolio at
all levels. We will only develop what customers demand. We are also
eliminating derivatives with low demand, as well as reducing our
drive-train portfolio and country variants by up to 50%. This will
allow us to focus even more on customers´ desires and requests, and,
at the same time, offset rising manufacturing costs. - We have shortened the development process by up to a third. This
will enable us to take advantage of opportunities in the market
faster and allow us to be more efficient. -
We are systematically optimising structures and processes at our
headquarters, plants and the local subsidiaries as well as pooling
resources across all functional areas.
With Performance NEXT, we are continuously changing structures
and work methods to become faster and more agile.
I would like to talk now about the segment’s cash flow. Despite
higher capital expenditure and lower net profit, free cash flow in the
Automotive Segment still totalled 2.71 billion euros. We are aiming
for a similar amount for 2019. Our financial independence gives us the
freedom to shape our own future. At the end of the year, our liquidity
totalled 16.3 billion euros. This offers us a solid financial footing:
It ensures we are able to take action, even though parameters are
constantly changing.
Let´s move on to the Financial Services Segment, which, despite
rising interest rates in a number of key markets and fierce
competition, continued to grow its business in 2018. New contracts
with retail customers increased slightly, by 4.4%, to 1.91 million.
Both our leasing business and credit financing reported slight growth.
The penetration rate of 50.0% is 3.2 percentage points higher than the
previous year – driven mainly by new credit financing business in
China. Pre-tax earnings reflected the positive business development
and reached 2.16 billion euros.
Despite a substantial increase in its equity base, the Financial
Services Segment achieved a return on equity of 14.8% – and exceeded
our minimum requirement of at least 14%. Even with growing volatility
worldwide, the risk situation in the segment remained stable over the
past financial year. The credit loss ratio fell in 2018 and is now at
0.25%. Market price risks for our leasing portfolio also remained
stable overall. Prices in the North-American used-car markets even
trended upwards slightly. In Europe, however, we experienced slight
headwinds, as expected. From today’s perspective, we remain well
prepared for any business risks we may encounter.
Ladies and Gentlemen, Let’s move on to the Motorcycles Segment. With
over 165,000 units sold and our eighth sales record in a row, we are
on course to reach our target of 200,000 units in 2020. Pre-tax
segment earnings totalled 169 million euros. This decrease was mainly
due to model changeovers, plus mix effects. The EBIT margin was 8.1%
and once again within our target range of 8-10%.In 2018, BMW Motorrad
presented six new models. We expect growth to continue in 2019, thanks
to new mid-sized models, the new edition of the R 1250 GS, the highly
anticipated new S 1000 RR and other new models.
Finally, let’s look at intersegment eliminations. Intersegment
eliminations contributed 553 million euros, compared to negative 534
million euros in the previous year. As noted in previous quarters, the
main reasons for this development are lower elimination of
inter-segment profits for new leasing contracts, due to lower EBIT in
the Automotive Segment, and positive reversal effects, resulting from
strong growth in the leasing portfolio in previous years.
Ladies and Gentlemen, The BMW Group is known for its ability to
handle challenging terrain. We like challenges.
Despite massive headwinds, we delivered healthy profitability in 2018.
This shows just how much operational capacity this company has. So,
what are our plans for the current year? Even in this challenging
environment, we are setting our standards high. In 2019, we aim to
maintain the BMW Group’s position as the premium segment’s leading
manufacturer and will be targeting growth in all major sales regions.
We expect to see a positive impetus from our young product portfolio.
However, since a lot of the models are still in the launch and ramp-up
phases, earnings will not benefit from the full effect in 2019. Due to
the model changeovers, we expect the first half-year to be weaker
overall. We will continue to make substantial investments in new
technologies and future topics in 2019. The European Union’s extremely
ambitious CO2 legislation also requires high additional
expenses and will lead to higher manufacturing costs, which will
impact earnings.
At the same time, we again expect to face significant currency and
commodity headwinds in the mid-to-high three-digit million-euro range.
Future development in tariffs is another major uncertainty. Our
guidance assumes there will be no increase in tariffs between the US
and the European Union. The preparations necessary for the UK’s
withdrawal from the EU will be an additional burden in 2019.
Nevertheless, we continue to expect that there will be an orderly
Brexit. The competitive environment may also get tougher over the
course of the second stage of the WLTP transition.
In the Automotive Segment, we expect deliveries to be slightly higher
year-on-year. A range of 8-10% for our EBIT-margin is our clear target
in a stable business environment. But there are many parameters over
which we have only limited influence.
Due to the negative impact of the factors I mentioned, we expect an
EBIT margin between 6 and 8% in 2019. The high level of volatility
makes it difficult to provide a clear forecast. However, we will
continue to use all internal levers in working back towards our
strategic profitability target.
In the Motorcycles Segment – strengthened by our renewed model
line-up – we are planning for a solid increase in deliveries, with an
EBIT margin within our target range of 8 to 10%. In the Financial
Services Segment, we expect return on equity to be on a par with last
year and above our target figure of 14%.
Let’s take a look at the Group figures:
In addition to the headwinds I referred to, the absence of a number
of positive valuation effects from 2018 will lead to a significant
decrease in the financial result this year. As a result, Group
earnings before tax are expected to be significantly lower than the
previous year. We will continue to hire specialists in key areas for
future technologies. However, in 2019 we will not increase the overall
size of the workforce. The total number of employees will therefore
remain at around the same level as in 2018.
Depending on how conditions develop, our guidance may be subject to
additional risks: in particular, the risk of a no-deal Brexit and
ongoing developments in international trade policy. Partly as a result
of these factors, we are already seeing a slowdown in the global
economy. If conditions deteriorate further, effects on our guidance
cannot be ruled out.
Ladies and Gentlemen, The BMW Group remains focused on the long term.
We have already made a number of clear decisions as part of our
programme “Performance NEXT”. We will continue systematically
implementing the measures needed for growth, further increased
performance and efficiency.
This gives us the freedom we need to build the future and secure our
future competitiveness. Thanks to our operational and financial
strength, we are capable of steering this company successfully through
the industry´s transformation. We are continuing to develop and refine
our business model. Creating sustainable value remains our goal, not
only today but in the future.
Thank you.