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.