BMW has posted record profits for a fourth consecutive year in 2013, although increases are marginal in the face of rising costs and increasing global competition
IHS Automotive perspective | |
Significance | The BMW Group posted another strong set of financial results in 2013 with net profit rising by 4.5% year-on-year to EUR5.34 billion, the fourth consecutive year of record profits for the company. |
Implications | This result was despite a 1.0% decline in revenue to EUR76.06 billion as a result of currency effects, which contrasted with the group's overall sales volume figure for the year rising by 6.3% to 1.93 million units. |
Outlook | The company's 2013 financial and sales performance was one again evidence of a company in rude health and at the top its game in terms of product strategy, which is being supplemented by ongoing expansion in Asia and the US. |
The BMW Group has posted its fourth consecutive year of record profit figures in 2013 with a 4.5% year-on-year (y/y) rise to EUR5.34 billion (USD7.40 billion), according to a company press release. The company's profit before tax figure for the full-year rose marginally by 1.4% y/y to EUR7.913 billion despite the company ramping up its investment in R&D, new production facilities and rising personnel costs. Both the headline profit figures rose despite the company's overall revenue figure for the year falling by 1.0% y/y to EUR76.06 billion. As far as CEO Norbert Reithofer was concerned 2013's financial results were a case of mission accomplished. He said, "In 2013 we achieved new highs for sales volume and profit and have thereby reached the targets we set ourselves for the full year."
The company's financial services business unit posted a year of consistent rises with revenue rising by 1.7% y/y to EUR19.87 billion, with profit before tax up 5.0% y/y to EUR1.64 billion. There was a larger increase in vehicle financing contracts on the company's books in 2013, with the figure rising by 9.7% y/y to 1,471,385 units, all there was pressure on the earnings from these new contracts as a result enhanced competition in the leasing market, especially in Europe. The combined portfolio of lease and financing contracts in place with dealers and retail customers at the end of 2013 rose 7.4% to a total of 4,130,002 contracts.
BMW Group 2013 full-year financials (EUR bil.) | |||
2012 | 2013 | %change | |
Revenue | 76.06 | 76.84 | -1.0 |
Profit before tax | 7.80 | 7.91 | 1.4 |
Net profit | 5.11 | 5.34 | 4.5 |
If the company's financial unit was stripped out of the overall financial figures the core automotive business posted an actual marginal increase in revenues of 0.6% y/y to EUR70.63 billion. Increasing expenditure on the company's R&D activities and plant investment and other rising expenses had a more direct impact on the automotive unit's profitability, with EBIT declining by 12.4% y/y to EUR6.657 billion. However, the company's ongoing EBIT margin target of between 8 and 10% was once more comfortably achieved at 9.4%, although the group managed to exceed its targeted corridor in last year's financial results. Automotive profit before tax was also down by 8.5% to EUR6.56 billion.
These top-line figures were generated off a positive sales development which has already been covered at the beginning of the year, with group sales up 6.3% y/y to 1.94 million units (see Germany: 13 January 2014: BMW posts record sales with 6.3% y/y sales to 1.96 mil. units). BMW brand sales were up by 7.5% y/y during the year to 1,655,138 units, with the BMW X1, 3-Series and 5-Series the star performers in terms of sales growth. Mini sales were up by 1.2% y/y to 305,030 units, while sales on a regional basis sales growth in China and US once more led the way with increases of 8.1% y/y to 376,636 units and 19.7% y/y to 391,713 units respectively.
Upward financial trend in Q4
The company's full-year results were supported by a strong performance in final quarter. Revenue was again down by 1.6% on the y/y comparison to EUR20.21 billion. However, EBIT for the quarter rose by 4.2% y/y to EUR1.95 billion, while profit before tax rose 7.3% y/y to EUR1.89 billion. Net profit rose by 9.5% y/y to EUR1.31 billion off the back of sales volumes rising by 3.5% y/y to 527,620 units.
Outlook and implications
BMW's 2013 results are another set of very strong financials that have become almost routine, with the company its fourth consecutive year of record profit figures. However, despite a strong uplift in sales volumes of the company posted reduced overall turnover as a result of negative currency effects such as the strengthening of the dollar and yuan against the Euro. However, the company's commitment to latest in lean manufacturing techniques and a highly sophisticated purchasing network means the company still managed to grow its bottom-line profit figure during the year. The company is fighting hard to retain its position as the world's leading manufacturer of premium vehicles, with important new model launches like the 2-Series Active Tourer supporting the company's plans for sales growth, with the new X4 adding to its crossover/SUV range. The new X5 should also help boost BMW's model mix in 2014,although it should be noted the previous generation model was notable in barely witnessing sales declines in the latter part of its model cycle, The 2-Series Active Tourer is a particularly important model in terms of sales growth as it will offer a BMW in a brand new segment for the company (MPV-C) and offer a BMW product to customers who would have been unlikely to consider the brand in the past. BMW also continues to invest in new production facilities to increase its strategy of building vehicles in markets where they sell in big numbers, and this will in turn have the effect of insulating BMW further against currency fluctuations (see United States: 13 January 2012: BMW to Expand US Plant and Confirm X4, New "M" Performance Automobiles Division Announced). For 2014 IHS Automotive forecasts that BMW brand sales will stay ahead of world number 2 Audi, despite the Ingolstadt brand besting BMW in the first two months of the year, with full-year brand sales of 1.80 million units to Audi's 1.67 million units. BMW Group sales will rise from 1.96 million units to 2.14 million units during the year,.