From BMW’s record earnings statement on Wednesday:
“The BMW Group is well on its way towards achieving new sales volume and earnings records for the full year. We are aiming for a record sales volume of well over 1.5 million vehicles as well as new full-year sales volume records for each of our premium brands BMW, MINI and Rolls-Royce.”
– Norbert Reithofer, Chairman of the Board of Management of BMW
Quite some performance. No wonder shares rose 2.3 per cent following the announcement (although by pixel time they had backtracked to just a 0.44 per cent gain).
But, if you’re wondering who in particular has been buying all those premium BMWs…
The BMW Group recorded growth in almost all regions during the first three months of the year. In total, 200,088 BMW, MINI and Rolls-Royce brand cars were sold in Europe, 13.0% more than in the previous year. Within those figures, sales increased by 9.0% to 64,064 units in Germany and by 21.7% to 39,259 units in Great Britain.
Growth was also recorded in Italy (19,007 units; +8.0%), France (16,422 uníts; +13.5%) and in Spain (10,722 units +3.3%). The sales performance in North America was also strong in the first quarter, with the number of cars sold rising by 17.3% to 71,257 units. Sales in the USA rose by 18.2% to 65,163 units, making it once again the largest single market for the BMW Group. High growth rates were also achieved in Asia, where a total of 90,148 units were sold (+53.0%), including 58,706 units (+71.6%) in China.
So that would be mainly the Chinese (where BMW saw a rise of 71.6 per cent in unit sales in the quarter alone) – with a not unimpressive performance from the US and the UK too.
The big surprise though came in just how many retail units were sold in the first quarter of 2011.
Citi analysts noted that production soared to 435,000 units in the quarter versus an already released figure of 383,000 units — because the pipeline continued to be filled.
Interestingly, there was an equally impressive performance from BMW’s financial services unit:
Sharp rise in earnings of Financial Services segment
The Financial Services segment has also made a good start in 2011, with first-quarter revenues rising by 4.5% to euro 4,183 million (2010: euro 4,004 million). Profit before tax improved to euro 429 million (2010: euro 222 million), partly reflecting the fact that refinancing conditions remained favourable. The total number of lease and financing contracts under management increased by 4.1% to stand at 3,233,567 at 31 March 2011. The number of new financing and lease contracts signed (276,856) was 13.8% up on the previous year. Compared to the previous year, lease business grew by 19.3% and credit financing by 11.5%. Leasing accounted for 30.3% of new business, credit financing for 69.7%. The credit loss ratio for the quarter fell to 0.55% (2010: 0.65%).
What isn’t mentioned above, however, is that at the end of 2010, BMW Financial Services China began its own business activities.
The update also doesn’t reference the contribution from that new business.
Of course, it’s unlikely to have accounted for the bulk of the boost in sales in China since total lease and financing contracts for the whole financing group were up by roughly 43,000 contracts on the quarter versus new vehicle sales in China alone of 58,706.
Nevertheless, BMW’s growing credit profile in China is worth bearing in mind looking ahead — especially so in light of its growing exposure to the renminbi (among its biggest currency exposures).
As Citi noted:
BMW has indicated no change to guidance – for higher full year group PBT and >8% Auto EBIT, with progress concentrated in 1H11. It previously guided to ‘low 3- digit million’ tailwind from FX and headwind from Raw Materials, and its statements, however, point to a worsening in both trends. Market forecasts pre-results foresee €5.9bn of Group EBIT giving €5.9 EPS for 11E (Citi sees €6.3bn EBIT and €6.7 EPS), and these consensus forecasts already incorporate around 8.9% Auto EBIT (Citi: 9.1%). Potential financial ramifications from Japan supply-chain issues are downplayed by BMW. We think it likely full year consensus sees a possible ~10% lift following figures, though despite the 3-Series launch at beginning of 2012, would not expect such a major revision for 12E.
And it seems BMW’s CFO, Friedrich Eichiner, is aware of the possible tailwinds to come from China. As Reuters quoted him saying following the results:
Says growth in China will slow, western euroepan car market will stagnate
Says expects to reach its goal of 8-10 percent EBIT margin in auto business beyond 2012
Says sees growing demand in the United States this year
Says it can be expected that the second quarter will be strong as well
Says sees tailwinds from currency effects to balance headwinds from rising commodity prices this year
Says currently does not expect Japan quake to have a significant impact on business this year, but cannot rule anything out
Related links:
BMW Q1 boosted by Chinese, U.S. demand - Reuters
BMW Profit Soars On Demand From China, US Recovery – WSJ