Ladies and Gentlemen,
Good morning!
In the second quarter of 2021, as expected, the BMW Group was able to
build on its strong performance of the first three months. Individual
mobility remains in high demand across the globe. The EBIT margin in
the Automotive Segment for the year to the end of June was 13.0% and,
therefore, at a very healthy level.
In a decade of transformation, the BMW Group is taking an active and
formative role. Sustainable profitability lays the foundation for us
to continue investing in future technologies. That is why, during a
strong first half-year, we continued to focus on our performance. The
efficiency measures we launched in recent years are now also bearing fruit.
So far, thanks to the hard work of our staff in Purchasing,
Production and Sales, we have been able to make up for the challenges
in semiconductor supplies. But, as the supply bottlenecks drag on, the
situation is becoming more volatile. That is why we anticipate further
disruption to production in the second half of the year and a related
impact on vehicle sales.
Ladies and Gentlemen,
Let’s start with the financial figures for the Group. The recovery
from the economic impact of the coronavirus crisis continued in the
first half of 2021.
In the year to the end of June, Group revenues climbed 28.1% to 55.36
billion euros.
At 9.74 billion euros, Group earnings before tax for the first six
months were, as expected, significantly higher than the previous year
– which had been heavily impacted by the lockdown. The figure for the
second quarter rose to almost 6 billion euros. Reflecting the positive
business development overall, the Group EBT margin was 17.6% for the
year to the end of June and 20.9% for the second quarter. The revenue
and earnings results largely reflect better pricing, positive effects
from our model mix, as well as higher sales volumes resulting from
increased demand. Both our new vehicles and our pre-owned cars are
proving very popular with customers right now. The significant
improvement in our financial result also boosted Group earnings.
Lower risk provisioning and higher income from the resale of
end-of-lease vehicles also contributed to the increase. Having
recognised higher provisions last year, in response to the volatile
situation caused by the pandemic, we were now able to release some of
this amount. In addition to this, as already announced in May,
positive effects came from the partial release of the provision in
connection with the EU antitrust proceedings of around
one-billion-euro, as well as from valuation effects from our pension
obligations. However, these positive effects were offset by headwinds
from higher raw material prices.
In recent years, we have implemented long-lasting changes in all
areas of the company that are now paying off. At the same time, we
have taken further important steps to reduce complexity: For instance,
new package solutions for our products have, in particular, made the
digital customer experience much simpler and more enjoyable. They are
also relieving pressure on the cost side.
To fully exploit sales potential and improve working capital, we are
constantly optimising our sales structures and using analysis tools to
manage our sales and inventories in an even more granular way, i.e. by
market, model or sales channel. In this way, we always have the
appropriate offer. On the production side, as previously announced, we
will reduce cost per unit by a quarter from 2019 levels by 2025. One
of the ways we will achieve this is by exploiting potential for
optimisation in logistics and capacity utilisation, as well as through
virtual planning processes.
Further electrification of our vehicle fleet is the focus of our
short and medium-term planning. The all-electric BMW iX has been
rolling off the production line at our plant in Dingolfing since July.
This will be followed in the autumn by the all-electric BMW i4 from
our main plant in Munich.
At over 2.57 billion euros, RD expenditure for the first six
months remained high. This also includes initial upfront investments
for the Neue Klasse, as well as expenditure for further development of
our electric drive trains and digitalisation of our fleet. As always,
our focus remains on the customer. The RD ratio for the first
half-year, according to the German Commercial Code, was 4.6%.
All our decisions are clearly focused on the main topics of
electrification, sustainability and digitalisation. We are using
available resources intelligently for maximum impact.
Capital expenditure is higher than for the same period of last year,
at just under 1.71 billion euros. Investment in the launch of the new
iX and further development of our electric drive trains were key
drivers for this.
Higher revenues meant the capex ratio of 3.1% was slightly lower than
the previous year.
In the second half of 2021, capital expenditure is forecast to be
higher, due to the number of launches and usual seasonal effects. We
expect the ratio for the full year to be below our target figure of 5%.
The financial result increased significantly in the first six months.
The at-equity result once again reflects the strong business
performance of our Chinese joint venture BBA, whose earnings
contribution climbed to one billion euros, thanks to strong customer
demand. Of course, the figure for the previous year had been dampened
by pandemic restrictions, especially in the first quarter.
The other financial result benefited from valuation effects for
interest rate derivatives in connection with higher interest rates in
the US. The result from investments also saw further positive
valuation effects from the iVentures fund and SGL Carbon shares.
YourNow’s digital services have benefited from the Europe-wide easing
of pandemic restrictions in recent months. Demand has risen
significantly. FREE NOW Ridehailing, for example, achieved 140% growth
in taxi and chauffeur rides. SHARE NOW also experienced a strong
upswing in car sharing. Long-term rents increased by 41% in the first
half of 2021 compared to the previous year.
Ladies and Gentlemen,
Let’s now take a look at the individual segments, starting with the
Automotive Segment.
Strong demand in the international automotive markets was reflected
in significantly higher revenues – which reached 47.75 billion euros
for the year to the end of June. Revenues for the second quarter
totalled 24.98 billion euros. All regions of the world saw positive
development – especially China and the US.
The operating result, EBIT, reached a new all-time high of 6.19
billion euros for the first half-year. The figure for the second
quarter rose to 3.95 billion euros. As well as releasing some of the
provision for the EU antitrust proceedings, as I already mentioned,
lower employee numbers, better pricing and an exceptionally good
situation for residual value development also had a positive effect.
Higher raw material prices, including a sharp increase in rhodium and
palladium costs, dampened earnings development, however. Against this
background, the EBIT margin was 13.0% for the year to the end of June
and 15.8% for the second quarter.
The uncertainty over supply chains and additional raw material
headwinds remains high. As a result, earnings momentum is expected to
weaken in the second half of the year.
The segment’s financial result for the second quarter benefited from
the strong earnings contribution of almost 500 million euros from our
Chinese joint venture BMW Brilliance Automotive and positive valuation
effects from equity investments.
Let’s take a look at free cash flow in the Automotive Segment.
We are taking advantage of the current situation to systematically
optimise our working capital. We are on the right track: Free cash
flow in the Automotive Segment totalled 4.9 billion euros at the end
of June. Good working capital management related to lower inventories
due to the semi-conductor situation and, in particular, higher
earnings, are the driver for this. As is usual, payments for
investments will increase towards year-end. Additionally, earnings
momentum will be dampened by the supply bottlenecks I referred to. In
the second half of the year, we also anticipate cash outflows for
personnel restructuring measures. Tax pre-payments will also be due.
We are aiming for a free cash flow at year-end above our previous
record of 5.8 billion euros.
Let’s move on to the Financial Services Segment, which also benefited
from global sales growth and a positive risk situation in the second
quarter and delivered a strong financial performance.
A total of 1.03 million new financing and leasing contracts were
concluded with retail customers in the first half of 2021 – an
increase of 28% year-on-year. The total portfolio of 5.6 million
retail contracts was at the same level as at the start of the year.
The very positive development in pre-owned car markets I already
mentioned also continued in the second quarter – especially in the US
and UK. This resulted, in high income from the sale of end-of-lease
vehicles. Credit losses remained at a low level.
In the first half of the year, segment earnings before tax increased
to 1.94 billion euros. The figure for the second quarter was 1.15
billion euros. The prior-year quarter had been dominated by
uncertainty due to the coronavirus pandemic, with additional risk
provisioning for anticipated credit and residual value risks.
The Motorcycles Segment also performed well in the second quarter,
with eight new models introduced by the end of June. Thanks to this
strong product offering, we were able to grow sales to 107,000 units
in the first half of the year – a new all-time high for this period.
The segment’s operating earnings rose in line with the positive
business development in the year to the end of June to 284 million
euros. The figure for the second quarter was 149 million euros.
The EBIT margin for the first half of the year was 17.5%.
Ladies and Gentlemen,
Let’s take a look now at our guidance for the current year.
The BMW Group continues to focus on profitable, sustainable growth.
After a strong first half-year, we generally expect a positive
business development for the full year 2021. Our guidance assumes that
political and economic conditions will not deteriorate significantly.
It also does not take account of the possible further impact of the
coronavirus pandemic.
For the full year, based on our current assessments, we expect the
key financial and non-financial performance indicators to develop as follows:
We anticipate a significant increase in Group pre-tax earnings for
the full year. Thanks to ongoing personnel restructuring measures, we
intend to achieve our goals with a slightly lower number of employees
than last year.
In the Automotive Segment, we should see a solid increase in the
number of BMW, MINI and Rolls-Royce vehicles delivered to customers.
Electrified vehicles will account for a significantly higher
percentage of total volumes. We have a strong market position in
China. Demand for cars from our three BMW Group brands remains high in
the US and Europe. However, due to the current uncertainty over
semiconductor supplies, we cannot rule out the possibility of our
sales figures being impacted by further production downtimes.
Continued high raw material prices will have a significant impact in
the second half of 2021. We also expect to see the usual seasonal
increase in fixed costs towards the end of the year. For this reason,
the EBIT margin is forecast to be at the high end of our target range
of 7 to 9%. We will once again significantly reduce CO₂ emissions in
our new vehicle fleet.
In the Financial Services Segment, earnings development will benefit
more from the improved situation than originally anticipated – both in
terms of credit and residual value risks. This is reflected in a
higher return on equity than in our original guidance – which we now
expect to be within the range of 17 to 20%.
In the Motorcycles Segment, we had so far forecast a solid increase
in deliveries. Now, due to positive market development, it looks like
we will be able to deliver slightly more motorcycles than forecast in
March. We therefore anticipate a significant increase in deliveries,
slightly above the 10% mark. The EBIT margin will remain within our
target range of 8 to 10%.
Ladies and Gentlemen,
After the first six months of 2021, the BMW Group is on course to
meet its goals for the year. However, the uncertainty surrounding
semiconductor supplies makes planning for the full year difficult. Our
vehicle plants have the capacity and the flexibility to meet high
customer demand at all times. But we are dependent on functioning
supply chains.
There are, of course, opportunities to be found in every challenging
situation. We are taking advantage of these and have reacted quickly
and systematically in recent months. Activities have ranged from
inventory optimisation to sustainable efficiency measures in all areas
of the company. We are maintaining the momentum of the past few months
and actively shaping the transformation of the company.
Thank you.