The BMW Group felt the results of the global economic and financial crisis significantly both in the second quarter and in the first six months of 2009, resulting in a noticeable decrease in the number of cars and motorcycles sold. In addition, business performance continued to be adversely affected by an increasingly competitive environment.
Car sales volume down due to economic crisis
The BMW Group sold 338,190 BMW, MINI and Rolls-Royce brand cars worldwide during the second quarter 2009, 18.1 % fewer than in the same quarter one year earlier. The six-month sales volume figure was 19.5 % lower at 615,454 units.
The Motorcycles segment also fell short of last year’s sales figures, with 29,742 units sold during the period from April to June 2009 (– 14.7 %) and 46,974 units sold in the first six months of the year (– 16.0 %).
At 30 June 2009, the Financial Services segment was managing a portfolio of 3,028,575 lease and credit financing contracts with retail customers and dealers, representing a growth of 7.9 %.
Economic crisis impacts revenues and earnings
In the face of wide-scale contraction on major sales markets, second-quarter Group revenues fell by 10.9 % to euro 12,971 million. Revenues for the first six months also fell well short of the high figure recorded one year earlier, coming in at euro 24,480 million (– 12.1 %). Adjusted for exchange rate factors, revenues for the six-month period would have decreased by 13.7 %.
The BMW Group’s second-quarter and six-month earnings were also affected by ongoing difficult business conditions. The profit before financial result (EBIT) was down by 60.2 % to euro 169 million for the second quarter 2009 and to euro 114 million (– 90.9 %) for the six-month period.
In line with the negative developments on the automobile markets, the result before tax was also correspondingly affected. The profit before tax for the second quarter, at euro 151 million (– 74.9 %), was well below last year’s level. The loss before tax for the six-month period was euro 47 million.
The BMW Group reports a net profit of euro 121 million (– 76.1 %) for the second quarter 2009 and a loss of euro 31 million for the first six months of the year.
Outlook of BMW Group for the remainder of 2009
The BMW Group assumes that the macroeconomic environment will remain unfavourable during the second half of 2009. As a result of increased unemployment and the rising number of company insolvencies, a general atmosphere of uncertainty has arisen with regard to future developments in 2009 and beyond. Consumers are becoming less willing to spend, particularly when it comes to purchasing durable goods. Car markets worldwide are therefore experiencing double-digit downturns. This situation is exacerbated by the high volatility of international financial and raw materials markets. The unfavourable economic situation also presents a major challenge for the BMW Group. The current business climate renders it impossible to make a reliable forecast regarding the further course of business in 2009.
Measures were taken at an early stage to adapt to the situation and risk provision levels were adjusted accordingly. The BMW Group stands by its assessment that an adequate level of risk provision has been recognised to cover additional risks when selling pre-owned cars. The situation is such that while some markets are showing signs of slight recovery, others are reacting to the economic crisis with a delayed effect. Should the situation on the used car markets worsen during the second half of 2009, an increase in the level of risk provision cannot be ruled out. Should the crisis persist, this will also result in a tendency towards increased risk in the area of dealer and retail customer financing.
The BMW Group continues to have a stable liquidity base despite the current crisis situation. Thanks to the BMW Group’s high level of creditworthiness, access to the international financial markets and the supply of cash funds remain secure, even in difficult times. Although risk spreads on the capital markets have continued to narrow somewhat, they have not yet returned to the levels seen before the start of the economic and financial crisis.
As long as the current economic situation shows no signs of easing, the BMW Group will continue to chart its course through this phase of uncertainty with the aid of flexible and rapidly implemented measures. During this process, the BMW Group will also be able to take full advantage of the additional manoeuvrability which rigorous implementation of the Strategy Number ONE has made possible.
As part of a range of strategic sales measures, the BMW Group is able to adapt at short notice to changing demand in individual markets. Against a background of contracting markets, the BMW Group has managed to maintain its leading position in the premium segment of the international automobile markets. It has also succeeded in expanding market share on important markets with the BMW, MINI and Rolls-Royce brands.
The BMW Group also expects new models to provide impetus for its automobile business in the second half of 2009. Now that the new BMW 7 Series is available to customers worldwide, the BMW Group will be offering a fourwheel-drive version of the 7 Series for the first time from autumn onwards. The BMW X1 and the BMW 5 Series Gran Turismo will follow towards the end of the year. The X1 will further enhance the X-model family with the addition of the first off-road compact vehicle in the premium segment. The BMW X1 offers consumers the versatility of a Sports Activity Vehicle, the flexibility of a compact car and the dynamism of a BMW. The BMW 5 Series Gran Turismo represents the realisation of the Progressive Activity Sedan and defines a completely new segment on the car market. The Gran Turismo embodies a unique combination of elegance, interior comfort and variability. The characteristic features of a prestigious limousine, a modern and versatile Sports Activity Vehicle and a classic Gran Turismo are all united in the BMW 5 Series Gran Turismo.
Thanks to its flexible manufacturing structures, the BMW Group enjoys a leading position in competitive terms. This has enabled the Group in the past to anticipate falling demand and adapt accordingly by reducing production volumes. At same time, lower inventory levels also play a key role in managing working capital. An integrated approach to the customer-oriented sales and production process enables sales processes to be adjusted flexibly and rapidly, whilst also ensuring the efficient utilisation of existing production capacities.
Implementation of the profitability programme has brought about further progress in the area of cost management. The reduction in personnel expense as a result of the staff reduction programme initiated in 2008 is already beginning to bear fruit. The BMW Group will continue to benefit over the remainder of the year from substantial improvements in efficiency.
Despite the difficult climate, the BMW Group continues to invest in the future with a view to strengthening its competitive position. As well as continuing to work on the enhancement of highly efficient combustion engines, this strategy also includes the development of innovative mobility concepts in conjunction with project i. The BMW Group is convinced that new and forward-looking products and technologies are important factors for taking the best advantage of the opportunities created by changing markets in both the medium and long term.
Although the automobile business is now showing some signs of recovery by comparison to the first quarter 2009, the BMW Group does not expect – on the basis of its latest assessment and taking into account the adverse factors caused by the crisis – that it will be able to achieve the high sales volume figure recorded in 2008. However, persisting uncertainty as to how the economic crisis might proceed makes it extremely difficult to forecast sales volumes at present. The BMW Group is therefore working with various market and sales volume performance scenarios and is preparing appropriate measures to take account of future developments.
In the motorcycles line of business, the BMW Group will continue to pursue its new model initiative throughout the rest of 2009 in an effort to counter reluctant consumer spending caused by the global economic crisis. Despite these measures, however, motorcycle sales are nevertheless expected to be lower than in the previous year.
The Financial Services segment performance continues to be overshadowed by the unstable economic situation worldwide and by a prevailing sense of uncertainty. The BMW Group expects that the used car markets in North America will continue to stabilise. At the same time, however, additional expenses to market vehicles coming out of leases in Continental Europe cannot be ruled out. Given the current economic situation, it seems unlikely that credit risk profiles will improve in the retail customer and dealer financing lines of business.
Profitability targets for 2012 remain unchanged
In the face of the business conditions described above, it is not currently possible to make further quantitative assertions regarding earnings.
The BMW Group continues to pursue the profitability targets for 2012 set in line with the Strategy Number ONE. The BMW Group intends to remain on its strategic course and intensify the range of measures necessary to cut costs and improve efficiency. The aims remain unchanged: to achieve a return on capital employed (ROCE) in the Automobiles segment in excess of 26 % and a return on sales of between 8 % and 10 %.
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