Strong H1 for BMW but it’s not all plain sailing

VEHICLE manufacturer BMW continued its strong start to the year with record business levels during the second quarter – and hinted the Chinese headwinds may be shortlived.

Group revenues and sales volumes reached new heights for the period from April to June, with the group’s motorcycles segment raising its pre-tax profit to a new record level. First half group earnings before interest and tax (EBIT) exceeded €5bn (£3.5bn) for the first time.

In order to maintain its strategy of profitable growth, the group said it remained committed to achieving evenly balanced sales in the world’s three major sales regions – Europe, Asia and the Americas. This is designed to minimise dependence on any individual market.

Despite recent concerns about the state of the Chinese economy, the group said its own view was that the market there was normalising, thereby becoming increasingly competitive.

Q2 revenues rose by 20.2% to €23,935m (£16,815m). With a tailwind of favourable currency factors, the group said this growth was even more pronounced than the underlying sales volume increase.

Higher personnel costs, increased expenditure on new product start-ups and a change in the model mix (generally involving a higher proportion of compact vehicles) were the main reasons for a minor dip in the profit before financial result (EBIT) below the previous year’s level. EBIT amounted to €2,525m (£1,774m), a drop of 3%. Pre-tax profit came in at €2,582m (£1,814m), down 2.7% on the €2,654m reported a year ago.

In Q2 2014 the group achieved its best-ever April to June figures. At €1,749m (£1,228m), net profit for the three-month period was down 1%.

Global sales of BMW, MINI and Rolls-Royce brand vehicles between April and June increased by 7.5% to 573,079 units (2014: 533,187) – a new Q2 record.

Group revenues for the six-month period climbed by 17.6% to €44,852m (£31,551m), with currency factors partially fuelling the increase, in contrast to the previous year. Overall, profit before financial result (EBIT) rose by 7.5% for the H1 period to €5,046m, exceeding the €5bn mark for this period for the first time.

Despite the lower result from equity-accounted investment, partly reflecting the ongoing normalisation of the Chinese market, pre-tax profit was €4,851m (£3,408m), up 0.8% on last year.

The total number of cars sold by the group during the first half rose by 7.8% to 1,099,748 units (2014: 1,020,211 units).

“We remain firmly on track, achieving our best figures to date in terms of sales volume, revenues and earnings,” said Harald Krüger, BMW chairman.

“We remain committed to achieving an evenly balanced distribution of worldwide sales and maintaining the flexibility to react appropriately to developments on individual markets.”

CFO Friedrich Eichiner added: “For some time now, we have been drawing attention to the normalisation of the Chinese automobile market. In the medium and long term, however, we remain utterly convinced of its potential for growth, given the comparatively low rate of vehicle ownership, the country’s well-developed infrastructure and the strong affinity of the fast-growing middle class for brands.”

Vehicle sales in Q2 rose by 17% to €21,650m (£15,210m). EBIT declined 15.8% to € 1,819m (£1,278m), which it said reflected the challenging business conditions in certain markets aided by tougher competition.

The earnings performance was also influenced by changes in model mix, with compact vehicles accounting for a higher proportion of sales than one year earlier.

First half revenues were 15.6% higher at €40,543m (£28,483m).

The BMW brand recorded record Q2 sales, up 4.9% with 480,465 units (2014: 458,088 units) delivered to customers. Sales volume for the six-month period grew by 5.2% to 932,041 units (2014: 886,347 units). Momentum was provided by numerous models, including the BMW X5 and X6 as well as the 2 and 4 Series.

The BMW 2 Series saw total sales of 64,285 units (2014: 11,067 units) during H1, driven by sales of the new Active Tourer and the 2 Series Convertible. Sales of the group’s sector-leading 3 Series declined 7.2% to 219,369 units (2014: 236,289 units), which the group said was partly down to the fact that the Convertible and Coupé models are now reported as part of the BMW 4 Series. By the same token, these models helped boost worldwide sales of the BMW 4 Series to 79,351 units (2014: 47,031 units), a rise of 68.7%.

The BMW X5 saw sales volume rise by 25.9% to 85,983 units (2014: 68,283 units) during the first half. Sales volume figures for the BMW X6 were equally impressive, rising by 22.7% to 22,125 units (2014: 18,033 units). Keys to the new BMW X4 were handed over to 28,146 customers. The BMW i also continued to make good progress, with sales more than doubling to 12,562 units (2014: 5,405 units).

MINI recorded a 23.8% increase in sales in Q2, with sales jumping to 91,626 units (2014: 74,028 units). The six-month period also saw double-digit growth, with sales up by 25.8% to a new high of 165,938 units (2014: 131,896 units). The most pronounced increases were recorded for the MINI 3 and 5 door models, whose sales more than doubled to 107,542 units (2014: 47,056 units). A further surge is expected when the new MINI Clubman, is launched at the end of October.

Rolls-Royce posted its second-best six-month sales figures, with 1,769 vehicles delivered to customers. Nevertheless, this still constituted a drop of 10.1% on the same period last year.

Worldwide sales in Q2 stood at 988 units (2014: 1,071 units), a decline of 7.8%.
The group saw sales growth in all of its major sales regions during the first half.

In Europe sales were up by 9.5% to 488,490 units (2014: 446,188 units). The number of vehicles sold in Germany during this period increased by 2.6% to 137,830 units (2014: 134,308 units). In the UK – the group’s fourth largest market – there was a 15.2% increase to 110,822 units (2014: 96,180 units).

Sales of BMW and MINI vehicles in Asia grew by 4.4% to 337,107 units (2014: 322,943 units) during H1, including a 2.3% increase in sales on the Chinese mainland to 230,788 units (2014: 225,490 units). Double-digit growth rates were recorded in Japan, with six-month sales climbing by 10.6% to 33,960 units (2014: 30,692 units).

A good six-month performance was also recorded for the Americas region, with sales of BMW Group vehicles rising to 242,379 units (2014: 221,280 units), an increase of 9.5% on a year ago. In the USA, sales volume increased by 9.6% to 199,418 units (2014: 182,008 units).