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BMW CEO's Quarterly Updates. Raises 2010 Earnings Forecast.
Statement by Dr. Norbert Reithofer, Chairman of the Board of Management of BMW AG, Conference Call Interim Report to 30 September 2010
BMW Group raises earnings forecast for 2010
Good morning, Ladies and Gentlemen!
The BMW Group is on track to meet its goals for the business year 2010.
Our key financials for the first nine months of 2010 are the best proof of this:
* With more than one million BMW, MINI and Rolls-Royce cars sold, we exceeded the previous year’s level by 13 percent. We are benefitting from the attractive, new models in our young portfolio. We also expect a double-digit increase in sales in the fourth quarter.
* Sales at BMW Motorrad increased by 16.9 percent to over 81,500 units.
* The BMW Group achieved a positive pre-tax result of more than 3.1 billion Euros.
* Net profit stood at over 2 billion Euros.
Currently, the market climate in many countries is positive, and that includes demand for premium cars.
However, experts confirm that risks and uncertainties will remain before we see a lasting and reliable economic recovery.
Therefore, development in the markets is uneven. Volatility is still a risk.
During our last conference call, if you remember, I said we operate globally. We are pursuing balanced performance between Europe, Asia and North America.
* This goal is consistent with our long-term strategic direction.
* It limits our risk to market fluctuations.
* And it is our approach to managing the dynamics of important automotive markets, with the goal of participating in the long term growth – always in line with our motto: Production follows the market. During the first nine months of the year, sales have picked up in Asia, North America and Europe.
Let me give you four examples:
1. India: At our assembly plant in Chennai, we have increased capacity from 3,000 to 5,400 units. From December onwards, we will not only assemble BMW 3 and 5 Series Sedans there, but also the BMW X1.
At the same time, we are expanding the sales network to 22 dealerships by the end of 2011.
2. China: We have started construction of our new plant in Tiexi. This move will allow us to raise capacity in China to over 100,000 units annually from 2012 onward. The maximum long-term capacity for the Tiexi and Da Dong plants combined is 300,000 units a year. Together with our joint venture partner, we are investing 560 million Euros and creating around 1,000 jobs.
3. USA: As announced last month, Spartanburg is our competence center for BMW X models. Since September, production of the BMW X5 and X6 has been joined by the new X3, also exclusively for the global market. To allow for the manufacture of this additional model, we have stepped up capacity to 240,000 units per year. This means that more cars roll off the assembly line in Spartanburg than in our Munich plant. We have invested 750 million dollars in this site expansion. As a result, we will raise our headcount by 1,600 there.
4. Germany: We also show strong commitment to our home market. This applies in particular to future technologies such as e-mobility. We will build our Megacity Vehicle at our youngest plant in Leipzig, which has world-class production capabilities. We consider this a clear commitment to Germany as a location for advanced technologies and also to the country’s highly qualified workforce. The production network for the carbon fiber chassis of the Megacity Vehicle also includes our sites in Landshut and Wackersdorf. In cooperation with our joint venture partner SGL Carbon, we are setting up a carbon plant close to Seattle in the US. As a first step, we are investing 100 million dollars there.
All these activities show:
We continue to invest in our future.
This also applies to our models.
* The new 5 Series Touring has been available since September. Regarding the 5 Series Sedan, the all-wheel drive is on the market now, as is the extended wheelbase version for China.
* Later this year, the new BMW X3 will be launched in select markets. As a first, we are combining the auto start-stop function with a six-cylinder engine and an eight-gear automatic transmission.
* The MINI Countryman was introduced in September. This new member of the MINI family demonstrates once again that MINI never fails to inspire fans with innovative and original ideas.
* The Rolls-Royce Ghost has more than met our expectations. As of September, we already delivered a total of over 1,700 Ghost and Phantom models.
We will continue to update our model range.
This includes other hybrid offerings such as the new BMW 5 Series Sedan with hybrid drive starting in 2011. The next generation of the BMW 3 Series will also include hybrid models.
When we launched our Strategy Number ONE in 2007, we decided that we wanted to grow further – in the large as well as in the small segments of the premium market.
We were the very first car company to establish premium in the small car segment.
For almost a decade, MINI has been the clear leader and trendsetter in this segment. Other car companies see how successful we have been with MINI and are now trying to follow in our footsteps.
In the future, we intend to participate even more in the growth of the small car segment.
This is why we are also planning to offer smaller BMW models – positioned below the BMW 3 Series – with front-wheel drive.
These models with front-wheel drive will also be made available to our customers with a hybrid engine.
For this very reason, we are strengthening our strategic cooperation with PSA:
Our cooperation is focused on developing and producing components for hybrid front-wheel drives. Additional economies of scale will be achieved by pooling certain purchasing activities.
I am talking specifically about e-drives, generators, and power electronics that control the interaction between a battery and electric drive.
We regard hybrids as an intermediate step toward achieving the goal of sustainable mobility.
The first fully electric, large-scale car of the BMW Group is scheduled to be launched in 2013.
I would like to emphasize that even when we talk about electric drive, we remain focused on offering our customers dynamics and sheer driving pleasure.
In contrast to all electric-cars currently available, our Megacity Vehicle is being created using a unique approach: Purpose Design.
* It is being designed from the ground up for the demands of electric mobility.
* It will have a one-of-a-kind car architecture consisting of a life module and a drive module.
* The life module will consist of new materials such as carbon-fiber reinforced plastic, setting completely new standards in our industry.
Regarding production of the Megacity Vehicle, the economical use of resources is imperative. It is a given that the same applies to all our cars.
We were the first to add a sustainability element to the term premium – and we continue to do so in the future.
In September, the Dow Jones Sustainability Index once again named our company the most sustainable car company in the world. We are also the only German company among the 19 industry leaders.
Ladies and Gentlemen –
Due to the positive business development in the past nine months, our guidance for the year 2010 is as follows:
* We plan to sell more than 1.4 million cars and increase sales by more than 10 percent over 2009.
* We will post a group pre-tax profit significantly above the previous year’s level.
* We will achieve an EBIT margin in the automotive segment of over 7 percent.
Our long-term profitability targets for 2012 remain unchanged.
We are staying our course with full confidence.
At the end of the month, it will have been 50 years that Herbert Quandt became a shareholder of our company – thus giving BMW its independence.
This legacy is as strong today as it was half a century ago.
The BMW Group continues to stand for:
* Future viability and
Thank you for your attention.
* Press Release
Automobile segment aiming for EBIT margin of above 7%
Third-quarter EBT jumps to euro 1,359 million
Automobile segment EBIT rises to euro 1,152 million
EBIT margin of 8.1% for Automobile segment
Munich . The BMW Group continued to perform extremely well in the third quarter 2010, recording sharp increases in sales volumes, revenues and earnings. Third-quarter Group revenues rose by 35.6% to euro 15,940 million (2009: euro 11,759 million) while the profit before tax jumped to euro 1,359 million (2009: euro 126 million), the highest pre-tax profit ever recorded by the BMW Group in a single quarter. The third-quarter profit before financial result increased to euro 1,192 million (2009: euro 55 million), while the third-quarter profit after tax improved to euro 874 million (2009: euro 78 million). The number of cars sold during the period from July to September increased by 13.0% to 366,190 units (2009: 324,100 units).
“We are very pleased with our third-quarter performance. Our attractive model range and the recovery of the global economy have enabled us to achieve another significant rise in sales volumes. Measures taken to boost profitability and a renewed high-value model mix have also had a positive impact“, stated Norbert Reithofer, Chairman of the Board of Management of BMW AG, on Wednesday in Munich.
Nine-month revenues grew by 20.7% to euro 43,731 million (2009: euro 36,239 million), with an EBIT of euro 3,358 million (2009: euro 169 million) and a profit before tax of euro 3,166 million (2009: euro 79 million). Profit after tax for the period amounted to euro 2,032 million (2009: euro 47 million). The total number of BMW, MINI and Rolls-Royce brand vehicles delivered to customers up to the end of September increased by 13.1% to 1,062, 216 units (2009: 939,554 units).
BMW Group again raises earnings forecast for 2010
As a result of the positive business trend, the BMW Group is once again increasing its earnings forecast for the current financial year. “We are currently aiming to achieve an EBIT margin of above 7% as a result of the strong sales volume performance in the Automobile segment in 2010“, said Reithofer. Previously, a full-year EBIT margin of over 5% had been forecast for the Automobile segment. The forecast for the Financial Services segment remains unchanged with a sharp improvement in earnings before tax and a return on equity of over 18%.
"The BMW Group is well on its way towards achieving its targets for the full year. We want to increase Group earnings significantly in the current year and thus take an important step towards achieving our targets for 2012“, continued Reithofer.
Sales volumes will continue to be boosted in the coming months thanks to new models. “We forecast robust double-digit sales volume growth again in the fourth quarter and are therefore confident that the full-year sales volume figure will increase by more than 10% to over 1.4 million vehicles. With this performance, the BMW Group will remain the world’s leading provider of premium vehicles in 2010“, commented Reithofer.
The new 5 Series Touring, the extended wheelbase version of the BMW 5 Series Sedan for the Chinese market and the MINI Countryman have been on sales since September. The new BMW X3 will follow at the end of the year. Order-intake has been strong for all of these models.
In 2012, the BMW Group still aims to achieve an EBIT margin of eight to ten percent in the Automobile segment and a return on equity of at least 18% in the Financial Services segment.
Dynamic growth for Automobile segment
The Automobile segment continued to grow dynamically in the third quarter. The main factors benefitting segment earnings were higher sales volume, a high-value model-mix, better pricing and lower material costs.
EBIT for the third quarter improved from a negative euro 76 million to a positive euro 1,152 million on revenues of euro 14,210 million (2009: euro 10,178 million/+39.6%), resulting in an EBIT margin of 8.1%. The third-quarter result before tax turned around from a loss of euro 154 million to a profit of euro 1,285 million. The pre-tax return on sales was 9.0%. Third-quarter sales of BMW brand cars rose by 16.3% to 306,982 units (2009: 263,864) units. MINI recorded a sales volume of 58,450 units (2009: 60,104 units/-2.8%), while Rolls-Royce was able to increase its third-quarter sales figure almost six fold to 758 units (2009: 132 units).
Nine-month revenues of the Automobile segment rose to euro 38,551 million (2009: euro 30,610 million/+25.9%). The segment EBIT for the first nine months of the year turned from a loss of euro 358 million to a profit of euro 2,760 million, corresponding to an EBIT margin of 7.2%. The segment profit before tax improved significantly to euro 2,443 million (2009: loss before tax of euro 783 million). Adjusted for the externalisation of pension obligations and the purchase of marketable securities, the free cash flow generated by the Automobile segment during the period from January to September 2010 amounted to euro 2.1 billion. On an unadjusted basis, the free cash flow was euro 468 million.
The nine-month sales volume rose worldwide by 13.1% to 1,062,216 units (2009: 939,554 units). The number of BMW brand cars sold during the period from January to September increased by 14.8% to 892,737 units (2009: 777,455 units). Growth was achieved in particular by the BMW 5 Series (155,648 units/+22.2%), the BMW X1 (72,294 units), the BMW X5 (74,655 units/+16.2%) and X6 (34,464/+13.1%), the BMW 7 Series (47,349 units/+41.7%) as well as the BMW Z4 (20,637 units/+21.9%). Nine-month sales of the BMW 3 Series edged up by 1.1% to 295,608 units (2009: 292,466 units). The BMW 1 Series recorded a nine-month sales volume of 151,681 units (2009: 164,114 units /-7.6%). Now coming to the end of its life-cycle, the BMW 6 Series recorded a sales volume of 5,149 units (2009: 7,078 units/-27.3%) during the period from January to September.
MINI brand sales during the first three quarters of the year went up by 3.8% to 167,751 units (2009: 161,638 units). This was helped by the good start made by the MINI Countryman which has been on sale since mid-September. Since then, 1,763 units of the first MINI Crossover model have been handed over to customers. Model revisions of the remaining MINI models have also been available since mid-September. The positive impact on sales volume figures is already perceptible: with more than 25,200 units sold, the MINI brand – with which the BMW Group created the first premium product in the small car segment back in 2001 – recorded its best September sales volume figure to date.
Rolls-Royce continues to perform successfully. With 1,728 units (2009: 461 units) handed over to customers, the sales volume almost quadrupled in the first nine months of the year. Demand for Rolls-Royce brand cars has been strong, in particular for the Ghost launched in December 2009, of which 1,535 units have been sold up to the end of the third quarter 2010.
Sales volume growth was recorded on almost all markets during the first nine months of the year, with China and the American markets in particular well ahead of the previous year. In Europe, the number of cars sold rose by 3.2% to 577,626 units. The company also remained on a growth course in its largest international market during the period under report. A total of 192,569 units were sold in the USA during the nine-month period, for instance, 7.4% more than in the previous year.
Sales in Asia during the period from January to September climbed by 59.4% to 206,490 units. The BMW Group recorded very strong growth on the Chinese markets, almost doubling nine-month sales in China (including Hong Kong and Taiwan) to 132,270 units (+96.1%).
BMW Motorrad reports sharp sales volume increase
BMW Motorrad increased its third-quarter sales volume by 7.7% to 24,493 units (2009: 22,741 units). Segment revenues for the quarter rose by 21.8% to euro 291 million (2009: euro 239 million). The EBIT for the period from July to September turned around from a negative euro 3 million to a positive euro 2 million. The number of motorcycles sold during the nine-month period increased by 16.9% to 81,508 units (2009: 69,715 units), with segment revenues improving by 25.0% to euro 1,081 million (2009: euro 865 million). The nine-month segment EBIT jumped by 72.5% to euro 88 million (2009: euro 51 million), while the segment profit before tax improved by 84.4% to euro 83 million (2009: euro 45 million).
The BMW Group was able to strengthen its competitive position further during the period under report despite difficult market conditions and is now market leader in the 500 cc plus segment in countries such as Germany, Italy, Spain, the Netherlands, Belgium, Austria and South Africa.
Sharp rise in Financial Services segment earnings
Improved business conditions on the international automobile markets also benefited the third-quarter performance of the Financial Services segment. Revenues increased by 11.7% to euro 4,278 million (2009: euro 3,831 million). The segment reported a third-quarter profit before tax of euro 318 million (2009: euro 94 million) and an EBIT of euro 308 million (2009: euro 89 million). Nine-month segment revenues went up by 3.5% to euro 12,480 million (2009: euro 12,058 million). The segment profit before tax for the first nine months of the year increased to euro 919 million (2009: euro 247 million), while the segment EBIT improved to euro 900 million (euro 234 million).
At 30 September 2010, the Financial Services segment was managing a portfolio of 3,144,817 lease and credit financing contracts, 3.0% more than in the previous year. The number of new contracts rose worldwide by 6.7% to a total of 802,719 contracts. Leasing business grew by 4.7%, credit financing by 7.5%. Lease contracts and credit financing accounted for 28.4% and 71.6% of new business respectively. The proportion of new BMW Group cars financed or leased by the Financial Services segment was 47.6%, 1.3 percentage points below the proportion recorded one year earlier.
Workforce roughly at previous year’s level
The BMW Group had a worldwide workforce of 96,402 employees at the end of the third quarter (30 September 2009: 98,358 employees), marginally up (+0.2%) on the level at 31 December 2009. Compared to the end of the third quarter last year, the number of employees fell by 2.0%. The number of apprentices employed by the BMW Group remained at a high level. In Germany, some 1,080 apprentices started their training with the BMW Group during the third quarter. Worldwide, the figure was 1,124 apprentices.