Ladies and Gentlemen,
The BMW Group remains on course after the first six months of 2019.
In a challenging, declining overall market, we increased our segment
share. As previously announced, the operating result for the
Automotive Segment has improved compared to the first quarter and we
are on track to meet our goals for the year, as planned.
Our performance shows that we are in a strong position compared to
many competitors, despite a difficult political and economic
environment. The company’s half-year sales topped 1.25 million
vehicles for the first time – thanks largely to our young and
attractive product portfolio. A good example of this is the X7: By the
end of June, the X7 had already been delivered to more than 13,000
customers around the world. Our performance remains particularly
dynamic in China, where – despite a declining overall market – we
reported double-digit growth.
Ladies and Gentlemen, Let’s look first at our financial figures for
the Group. Group revenues for the second quarter rose by 2.9% to 25.72
billion euros – benefitting in part from a slight currency tailwind.
We once again made high upfront investments in the second quarter as
we strive to shape technological change.
As expected, currency and commodity prices, higher depreciation and
measures for emission-free mobility also had a dampening effect. The
financial result for the second quarter came to -148 million euros. I
will provide more details later for each segment.
Impacted by the lower financial result, second-quarter pre-tax
earnings totalled 2.05 billion euros. Due to the provision made in the
first quarter in connection with antitrust allegations by the European
Commission, pre-tax earnings for the first six months decreased to
2.82 billion euros. The Group EBT margin stood at 8.0% for the quarter
and 5.8% for the half-year. Excluding the provision, the figure for
the year to the end of June was 8.7%.
Ladies and Gentlemen, Running a sustainable, profitable business
remains our top priority. We are therefore making systematic
investments today to secure our future – even in the current
challenging business environment. A high degree of flexibility is
essential. With our efficient combustion engines, plug-in hybrids and
battery-electric drive trains, we are highly diversified and open to
different technologies. At the same time, we are continuing our
research into fuel cells.
In addition to further developing our drivetrains, we are also
focusing on increased connectivity between drivers, vehicles and their
environment, autonomous driving and mobility services. Second-quarter
research and development expenditure according to German Commercial
Code amounted to 1.48 billion euros. The figure for the first
half-year was around 2.83 billion euros. The RD ratio for the
second quarter stood at 5.7%. As previously announced, the ratio is
likely to stay between 6 and 6.5% for the full year. It will therefore
be lower than last year’s exceptionally high figure of 7.1%, as planned.
We continue systematically gearing ourselves for future-oriented
topics. This principle is also reflected in our investment strategy.
In the second quarter, we invested a total of around 1.18 billion
euros. Capital expenditure for the year to the end of June reached
2.18 billion euros. This seasonally atypical increase in the first
half-year stems mainly from the large number of product ramp-ups, as
for example the new 3 Series and the 1 Series, and the opening of the
new plant in Mexico. Going forward, we will be able to export the 3
Series Sedan from San Luis Potosí to more than 40 countries that have
free trade agreements with Mexico.
The capex ratio for the year to the end of June reached 4.5%. Despite
the introduction of IFRS 16, we still expect the ratio for the full
year to be only slightly higher than the previous year’s 5.2%.
Ladies and Gentlemen, Let’s move on to the individual segments. In
the Automotive Segment, deliveries to customers remained stable from
last year, as planned. Despite the model changeovers I mentioned and
the highly competitive environment, especially in Europe, segment
revenues for the second quarter increased to 22.62 billion euros.
The segment’s operating earnings for the second quarter totalled 1.47
billion euros. The EBIT margin was 6.5%. Due to the provision we
recognised in the first quarter, the margin for the first half-year
was 2.8%. We are on course for the expected target range for the
entire year of between 4.5 and 6.5%. Without the provision, the figure
was 6.1% and therefore within our original guidance of 6 to 8%.
The increasingly challenging market environment and sustained intense
competition dampened business development. As expected, higher
manufacturing costs and scheduled depreciations also impacted
earnings. RD spending remained high, as planned – focusing, in
particular, on development of vehicle architectures and drivetrains,
as well as new products, electrification and connectivity.
In the financial result, the preliminary one-time revaluation effect
from combining mobility services with Daimler was mostly offset by a
planned loss in equity-accounted investments in YOUR NOW companies. In
the previous year, the result included a positive valuation effect in
connection with the acquisition of DriveNow.
Let’s look at the segment’s free cash flow: At 869 million euros for
the second quarter, it was, as expected, significantly higher than in
the first three months of the year. We are also targeting a positive
free cash flow in the second half-year and aiming for a figure which
should approach a similar level as last year.
In addition to high capital expenditure and upfront investments,
market development in a number of regions is proving more challenging
than originally anticipated. This is dampening earnings and cash flow generation.
Ladies and Gentlemen, Let’s move on to the Financial Services
Segment, which continued its growth trajectory in the second quarter.
The number of new contracts concluded with retail customers rose by
4.4% in this quarter to more than 500,000 contracts. With more than
5.35 million retail contracts as of 30th of June, the total portfolio
increased 2.3% from the end of 2018. The China region notably reported
strong growth.
Pre-tax segment earnings for the first half-year rose 3.8% to 1.2
billion euros. This positive development in the first half-year is
largely due to portfolio growth and the continued stability of the
risk situation with reduced residual value risk expenses in individual markets.
The second-quarter figure was 573 million euros. This figure is
impacted by negative effects in the financial result from the market
valuation of interest rate derivatives due to falling interest rates
across the globe.
Let’s look next at the Motorcycles Segment. BMW Motorrad performed
well in the first half of the year. A total of around 93,200
motorcycles were delivered to customers – an increase of 7.1 percent.
This positive business development was reflected in the operating
result, which, at 102 million euros for the second quarter, was also
higher year-on-year. The EBIT margin was 14.0%.
Ladies and Gentlemen, Let’s turn to the forecast for the current
year: In the first six months, business developed in line with our
expectations. As planned, we were able to improve on our first-quarter
performance. We expect this solid earnings development to continue
into the second half of the year, boosted further by our product
momentum. We are therefore able to confirm our outlook for 2019.
As long as conditions do not deteriorate significantly, we expect to
remain within our announced guidance range for the full year. In the
Automotive Segment, deliveries are forecast to increase slightly. More
new models will be launched in the second half of the year. We expect
the new 3 Series and the larger X models, in particular, to generate
positive momentum. We remain on course for an EBIT margin within our
adjusted target range of 4.5 to 6.5% for 2019.
In the Motorcycles Segment, we are planning for a solid increase in
deliveries. The EBIT margin should remain within our target range of
8-10%. In the Financial Services Segment, we expect return on equity
to be on par with last year and above our target figure of 14%. Group
earnings before tax will also be significantly lower year-on-year as a
result of the provision for ongoing antitrust proceedings and the
decrease in the financial result from the previous year. Our guidance
assumes that political and economic conditions will not change significantly.
Ladies and Gentlemen, Our strong performance in a declining overall
market shows that our attractive products and ground-breaking
technologies are winning customers. Flexibility will also remain key
to our future success. It allows us to respond to demand in different
regions of the world at any time and adjust volumes in line with
market development. At the same time, we continue to activate all
levers at our disposal to secure our profitability.
The BMW Group is, and will remain, a strong company. Our innovative
strength and a focus on growth, based on a very solid financial
profile, provides the best basis for future success.
Thank you.