BMW CEO Discusses Q2 Results - Earnings Call Transcript

BMW CEO Discusses Q2 Results - Earnings Call Transcript
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BMW (BAMXY.PK)

Q2 Earnings Call

August 3, 2010 10:00 am ET

Executives

Maximilian Schoeberl - Director of Corporate Affairs

Norbert Reithofer - Chairman

Friedrich Eichiner - CFO

Analysts

Arndt Ellinghorst - Credit Suisse

Christian Breitsprecher - Macquarie

Max Warburton - Bernstein

Daniel Schwarz - Commerzbank

John Buckland - MF Global

Philippe Barrier - Société Générale

Aleksej Wunrau - BHF Bank

Jochen Gehrke - Deutsche Bank

Jose Asumendi - Royal Bank of Scotland

John Lawson - Citi

Presentation

Maximilian Schoeberl

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Good afternoon ladies and gentlemen, this is Maximilian Schoeberl, Director of Corporate Affairs. I'd like to welcome you all to our half year telephone conference at BMW AG in 2010. With me today are, Dr. Norbert Reithofer, Chairman of the Board of Management; and Dr. Friedrich Eichiner, our CFO.

First, Dr. Reithofer will give you all an update on the business performance, then Eichiner will take you through our financial results. Afterwards we will have time for a Q&A session. Mr. Reithofer, please go ahead.

Norbert Reithofer

Good afternoon ladies and gentlemen. Over the first six months of 2010 our business performance has improved to show a positive dynamic development. This is why we raised our forecast for 2010 on July 13. We plan to sell over 1.4 million cars, 10% more than 2009. We aim at improving our pre-tax profit significantly above the 2009 level.

In the automobile segment, we expect to post an EBIT margin of over 5%. Where do we stand following the first six months of the current business year? We have generated a positive profit before tax of €1.8 billion. This result is considerably above the same period in 2008, and about on par with the result achieved in the first two quarters of 2007.

Group net profit stood at €1.1 billion. EBIT in the automobile segment was clearly positive at €1.6 billion. We also generated an adjusted free cash flow in the automobile segment of around €1.2 billion. This year offers a threefold benefit that comes from the following.

First, the economic recovery in some markets; second, the new attractive products that are in great demand; and third, the substance and efficiency enhancements that our company has achieved by continuing to focus on implementing strategy Number ONE.

To the first point: Some key markets like China and North America are growing. The same is true of India, Brazil and several markets in Europe. We have benefited from the economic upswing in these markets. At present, this applies mainly to China. In the first six months of the current business year, we managed to double our sales volume, as the overall Chinese automobile market improved by 50%. China remains a market with potential. It is presently the third most important market for our company in terms of retail.

We are currently building a new plant in Tiexi. The start of production is scheduled for 2012. We are expanding our dealership network, and we will give about 50 MINI E cars to Chinese customers for test purposes this year. With regard to the BMW Group's business, it is nevertheless important to me to emphasize: We are not solely relying on China. We are a company that acts and operates globally. We are active in all relevant markets, and we want to be successful in all these markets.

As the world's leading premium car manufacturer in terms of sales, we are aiming at a balanced business performance between Europe, Asia and the Americas. In other words, we want to grow on all continents in large and small markets alike. Naturally, we are pleased about the additional tailwind the economic upswing in some countries is providing us.

However, as we aim to achieve sound and sustainable growth in an uncertain environment, success will primarily depend on our own performance and our own strengths as a driver of innovation, as a company with an obtainable vision for the future, as a company that offers attractive products.

On to the second point: Our models are attractive more than ever. This applies to all models irrespective of the segment. Let me give you some examples for the first half of the year.

Over 30,700 BMW 7 Series were delivered to customers, making the 7 Series a clear segment leader. The new BMW 5 Series Sedan sold 25,000 units in the three-and-a-half months since its market launch. Over 68,600 customers bought a BMW X5 or X6. More than 46,700 customers chose a new BMW X1. We delivered 199,000 BMW 3 Series and more than 103,000 BMW 1 Series. And we have never sold more Rolls-Royce motor cars in a six-month period than in 2010.

All in all, worldwide sales of BMW, MINI and Rolls-Royce in the first six months of the current business year stood at over 696,000 cars and exceeded last year's period by 13%.

At the same time, BMW Motorrad improved significantly. Sales of the BMW brand rose by 21% to about 57,000 units in the first half of the year, bucking the trend in the motorcycle market because most motorcycle markets are still in decline.

Our Financial Services segment is growing as well. As you know, we have restructured and realigned our financial services division.

Now, a few more highlights about what's to come. In the second half of 2010, we are launching attractive new models. The Chinese market, entry of the new 5 Series Sedan Long version is scheduled for September. The 5 Series with all-wheel-drive will be launched shortly. The 5 Series model range will soon be complemented by the 5 Series Touring.

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