Bayerische Motoren Werke Aktiengesellschaft

Good afternoon, ladies and gentlemen. I would like to welcome you all to the BMW Group's telephone conference for the third quarter results. With us today are Oliver Zitze, Chairman of the Board of Management, and our Chief Financial Officer, Walter Nertl. First, Walter will take you through our financial results. Oliver will then give you a general business update for the BMW Group. Afterwards, we will have time for our Q&A session. Walter, please go ahead.

Good afternoon, ladies and gentlemen. The BMW Group delivered a strong performance in the third quarter. As expected, we achieved solid sales growth and correspondingly positive financial key figures. The Group EBT margin for the third quarter came in at 10.6%. For the nine-month period from January to September, it was 11.9%, exceeding our strategic target of 10%. The automotive segment posted an avid margin of 9.8% for the third quarter and 10.3% for the year to the end of September. Without depreciation of BVA assets from the purchase price allocation, the margins came in at 10.8% for Q3, and 11.4% through nine months. After a successful third quarter, we expect a positive business development in the fourth quarter. All segments are on track to meet our goals for the year. I'd now like to show you a few slides with our business figures for the third quarter and the first nine months in more detail. Let's start with the group figures. Group earnings before tax for the third quarter were on par with last year, at just under 4.1 billion euros, despite a significant advent from the fair value assessment of interest rate hedges compared to Q3 2022. Group pre-tax earnings for the year to the end of September decreased by about 6.8 billion euros. Last year's figure included one-time income of 7.7 billion euros from the revaluation of equity interests in PVA. Without this effect, and looking at the underlying operating result instead, group earnings were 900 million euros higher year-on-year in the first nine months. Let's take a look at the individual segments, starting with the automotive segment. The BMW Group delivered just under 622,000 vehicles to customers in the third quarter of 2023. A year-on-year increase of 5.8%. Year-to-date September, deliveries rose 5.1% to around 1.84 million vehicles. Our order books take us into 2024. this valuable impetus coming from new models like the BMW 5-Series. We expect this positive trend in deliveries to gain momentum in the fourth quarter, resulting in solid growth in vehicle sales for the full year, as forecasted in August. In addition to models from the upper price segment, our all-electric vehicles are another important growth factor. We sold around 94,000 units in the third quarter and just under 247,000 fully electric vehicles for a nine-month period. That share of total sales continues to grow. In the third quarter, it was 15.1%. In the fourth quarter, our sales of all electric vehicles will get a further boost from the launch of the new BMW i5. For the full year, we expect BEVs to account for about 15% of deliveries. After nine months, the share was 13.4%. Third quarter automotive revenues were at the same level as the prior year, at 32.1 billion euros. However, currency translation headwinds from the US dollar and Chinese renminbi played a part in this. Adjusted for these currency translation effects, Revenues increased by 6.5% thanks to higher sales. The automotive segment's operating result for the third quarter totaled just over 3.1 billion euros, with an EBIT margin of 9.8%. Year-to-date September, the EBIT margin came in at 10.3%. Let's take a look at the operating results in the automotive segment in more detail. In the year-on-year comparison, we see that Q3 2023 was impacted by just under 200 million euros from the net balance of currency and raw material positions. This difference is mainly due to currency translation effects from development of the Chinese renminbi. Raw material prices remain high, although we are seeing a slight tailwind compared to Q3 2022. However, this does not include material and logistic costs. Volume, model mix, and pricing effects all contributed to a tailwind of around 300 million euros in the quarter. The largest share of this position results from higher vehicle sales. The contribution from the model mix is only slightly lower than the previous year, despite bad growth. The market has continued to normalize over the course of the third quarter, partly due to improved vehicle availability. We continue to pay close attention to price discipline. Expenses for research and development rose by around 100 billion euros. This reflects the decrease in the capitalization rates of eight and a half percentage points to 32.2% year on year. Based on group R&D spending, the R&D ratio, according to German commercial codes, came in at 4.6%. We expect the figure for the full year to be within our long-term target range of 4 to 5%. Research and development expenditure focused on the electrification and digitalization of our beetle fleet as well as the development of new models, like the all-new BMW 5 Series and the Neue Classic. Digitalization includes the innovative BMW Operating System 9, which we are rolling out this year. We are also making great progress in the area of automated driving. With Level 2+, the new BMW 5 Series already offers a partially automated driving experience. We will also be launching highly automated driving level three shortly. Sales and administrative costs increased by about 100 million euros, partly due to higher spending for digitalization projects. Other cost changes include cost for materials and logistics. They remain at a high level due to, among other factors, higher labor costs from our partners. Although they were more or less stable in the quarter compared to previous year, we recorded a notable negative impact in the nine-month period. Previous flow in the automotive segment totaled 2.6 billion euros in the third quarter. The basis for this high figure is the strong quarterly result of 3 billion euros. The change in working capital increased free cash flow in this quarter by around 100 million euros. In Q3, inventory levels rose. However, the increase in trade payables nearly offsets the impact of the higher inventory on working capital. The delta between capital expenditure and depreciation reduced free cash flow in the third quarter by about 500 million euros. Capital expenditure for the first nine months totaled around 5 billion euros, mainly from the fifth and sixth generation e-medal kits and the construction of the plant in Debrecen in Hungary. The capex ratio for the year to the end of September was 4.5%. We still expect the ratio for the full year to be around 6%. Changes in provisions had a negative impact on free cash flow of about 400 million euros. In the third quarter, the profit sharing bonus for financial year 2022 was paid out to our employees, and the corresponding provisions dissolved. Other items boosted free cash flow by around 400 million euros. At the end of September, free cash flow in the automotive segment stood at around 5.8 billion euros. In the fourth quarter, we are planning for a significant increase in capital expenditure due to usual seasonality. This will negatively impact free cash flow. As I mentioned, we expect the capex ratio for the full year to be around 6%. Inventory will decrease towards the end of the year, but will still be at a high enough level to maintain vehicle supplies to markets. This will ensure we are able to meet the robust global demand for our vehicles in the first quarter of 2024. The planned significant uptick in costs as well as higher tax payments will weigh on our Q4 free cash flow. As a result, we still expect a free cash flow of above 6 billion euros for the full year 2023. Let's turn now to the financial services segment. I will focus on the first nine months of this portfolio business. Near today, September, the number of new financing and leasing contracts concluded with retail customers decreased by 5.6%. This is partly due to higher interest rates, which have substantially increased financing costs for consumers. At the same time, the financial services sector remains as competitive as ever. However, when we look at the course of the year, we see a clear positive trend in new business and financial services. While new contracts with end customers in Q1 were just under 20% below Q1 2022, they were back to the previous year's level in Q2. Driven by higher vehicle sales and by the pre-owned car business, financial services reversed the trend in the third quarter. new contracts with end customers rose by 5.7% compared to the third quarter of 2022. We expect the positive development in new business to continue in the fourth quarter as well. The average financing volume per vehicle increased from the previous year, primarily due to an improved product mix in the automotive business. For this reason, the volume of new business decreased by only 1.6% for the year to the end of September. Segment earnings before tax totaled 2.45 billion euros at the end of September, down 8.3% from the previous year. This decrease mainly reflects higher refinancing costs and the smaller size of the total portfolio. income from the resale of end-of-lease vehicles remains consistently high. The credit loss ratio is still at the low rate of spot 1.5% across the entire credit portfolio. And we expect return on equity for the full year to be within the range of 16 to 19%. Let's move on to the motorcycle segment. In the third quarter, BMW Motorrad sales were on par with the high level of Q3 2022 at just over 52,000 units. Segment EBITS totaled minus 4 million euros compared to 87 million euros in the third quarter of 2022. This decrease was primarily due to changes to the model launch calendar compared to the previous year. EBIT for the year to the end of September totalled to 308 million euros and was therefore slightly lower than the previous year. The EBIT margin came in at minus about 6% for the third quarter and 12.0% for the first nine months. I'd like to look now at the outlook for our key performance indicators. We expect to see stable business development for the rest of the year and are therefore able to confirm our guidance for the financial year 2023 for all segments. This assumes that the geopolitical and macroeconomic conditions do not deteriorate significantly. In the automotive segment, we are planning for a solid increase in deliveries compared to last year. The segment's EBIT margin should come in at between 9% and 10.5%, with a return on capital employed of between 18% and 22%. The motorcycle segment is projected to report higher sales. In this segment, we expect to see an EBIT margin of between 8% and 10%, and a return on capital employed of between 21% and 26%. In the financial services segment, return on equity should be between 16 and 19% for the full year. Ladies and gentlemen, our third quarter results once again underline the BMW Group's performance capabilities. On this basis, we will be able to deliver a strong finish to 2023. With our attractive premium product portfolio, We are in an excellent position across all brands, segments and drive technologies to take advantage of market opportunities. We remain cautiously optimistic about the future despite all the economic and geopolitical volatility. We have a long-term strategy and we have a clear plan. Our underlying earning power is the result of continuous profitable growth in our core business, as well as disciplined price and cost management. It lays the foundation for our business success and allows us to leverage our cash flow to finance our investment in emission-free mobility. At the BMW Group, our thinking and actions are always geared towards the long term. We are securing and creating value. And our financial strength allows us to shape our own future.

Thank you, Ross. Thank you very much, Walter. It was a pleasure. And now, Oliver Zisse. Oliver, please go ahead.