BMW Shows Strong Q1 Financial Results with Net Profit of 324 mil. Euro

BMW is continuing to recover strongly from the global economic downturn in the first quarter of 2010, recording a net profit of 324 million euro (US$424.1 million) during the period thanks to Group revenues which increased by 8.1% year-on-year (y/y) to 12,443 million euro from 11,509 million euro, according to a BMW press release. Profit before tax stood at 508 million euro in comparison to a loss of 198 million euro during the first quarter last year. Earnings before income tax (EBIT) during January to March were 449 million euro in comparison to the negative EBIT figure of 55 million euro last year. There was a significant rise in unit sales, with volumes increasing during the first three months of the year to 315,614 units, a 13.8% y/y increase on 2009's 277,264 units. Commenting on the first-quarter results BMW's Chairman of the Board Management Norbert Reithofer said, "The BMW Group has made a good start to 2010. We increased earnings significantly in the first quarter and are now back on a growth course on almost all car markets. The BMW Group continues to make good progress with its Strategy Number ONE. With demand for premium vehicles rising and the launch of new BMW 5 Series certain to add momentum from the second quarter onwards, the company can look forward to the remainder of the year with some optimism: We expect that earnings will grow dynamically over the course of the year."

The BMW brand recorded worldwide growth of 13.8% in the first quarter with sales of 265,809 units in comparison to the figure of 233.948 units last year. The 7-Series recorded a massive increase in sales during the period, with a 54.1% y/y rise to 14,245 units. The 7-Series Hybrid has also been launched, with deliveries starting in the towards the second half of the year. The BMW X1 has also posted robust sales since its launch since the first quarter of 2010, with sales of 19,657 units. Sales of some of the company's key models that suffered throughout the downturn showed signs of recovery in the first quarter of the year. The X5 sport utility vehicle (SUV) increased by 4.8% y/y to 22,897 units, while the X5 saw its volumes rise to 21.2% y/y to 10,826 units. The Z4 saw its sales rise to 6,461 units in comparison to the 1,563 units posted by the old Z4 model in the first quarter of 2009.The BMW 1-Series (47,909 units) and the BMW 3-Series (91,619 units) both recorded a growth rate of 2.4%.

BMW is expecting rising unit sales to continue throughout 2010 across all its main brands, including BMW, Mini and Rolls Royce, with new model launches across all its brands helping this uplift. Mini will be supported by the rolling out of the new Mini Countryman SUV, with Mini sales rising by 13.6% to 49,526 units. The Rolls Royce brand will see an accelerated rise in sales volumes this year as a result of the launch of the new "entry-level" Rolls Royce Ghost, with sales rising 60.3% y/y to 279 units. The company is looking for a major uplift in unit sales for the BMW brand through the launch of the F10 5-Series which made its debut at this year's Geneva Motor Show. However, sales fell by 3.4% y/y to 39,162 units for the 5-Series in the first quarter as the new model came on stream. The new 5-Series Sedan has been on the market since the end of March and the new 5-Series Touring will follow in mid-September, with order intake for the new model being described as excellent.

Outlook and Implications

BMW has presented a set of first-quarter results that shows the world's leading premium carmaker continuing to bounce back in a robust manner from the global economic downturn in 2009. The nature of the crisis and the various market stimulus efforts introduced by national governments in Western Europe and the United States meant that premium carmakers were disproportionately affected, but the BMW Group still performed well in 2009 to record a 210-million-euro profit during the year. This contrasted to the financial performance of the company's main rival the Daimler Group which posted a sizeable net loss of 1.5 billion euro, with the Stuttgart-based firm deciding against paying any kind of dividend for the year. As such BMW's financial performance was robust in 2009 and it has continued a strong performance into the first quarter of 2010. However, overtaking Mercedes-Benz as the world's biggest premium carmaker in 2005 BMW is now facing two main challenges. Despite its enormous success in increasing its sales over the past decade BMW has struggled to turn its strong sales volumes into equivalent profitability. The company now also faces a massive challenge from the Volkswagen (VW) Group's premium brand Audi, which is targeting BMW's current position as the world's leading premium carmaker by 2015.

BMW's struggle for profitability in recent years has been apparent but it is now aiming to surpass its savings goal of 4 billion euro by 2012. This figure will come partly from its partnership on component purchasing with its rival premium carmaker Daimler. Talks between BMW and Mercedes have yielded new projects over the past several months that will help each company reduce spending by 100 million euro a year by 2012, Herbert Diess, BMW's purchasing chief, said in an interview with Bloomberg. He said, "We can say that from today's perspective we will certainly and easily reach the 4 billion-euro savings goal, and even significantly surpass it." These savings are essential if BMW is to meet its goal of an 8-10% margin on EBIT by 2012. BMW is now looking to maintain its global market-leading position with a raft of new model launches which includes the Megacity electric passenger car which will debut in 2013, while its new small car range based on new front-wheel drive architecture will come into production in 2014. BMW is also targeting substantial growth in China through 2010 and the next five years. BMW announced its wider strategy in China last week (see China: 23 April 2010: BMW Unveils Details of Megacity Electric City Car, Confirms 2010 Chinese Sales Target). The company is planning a significant uplift in its Chinese sales in 2010 to 120,000 units as it looks to close the gap on the leading premium brand in China, Audi. This figure translates to a significant increase on the 87,000 passenger cars that the brand sold last year. To aid its sales growth in China this year, BMW is debuting the long-wheel-base version of the 5-Series at the Shanghai Motor Show, and is also giving the hybrid versions of the X6 and 7-Series their market debuts.