German luxury-car maker BMW AG (BAMXF 1.97%) said on March 21 that its profit before tax in 2018 will be at least equal to the 10.65 billion euros ($13.1 billion) it made in 2017, despite a plan to spend big on autonomous-driving technologies and the development of a new range of electric vehicles.
BMW's 2017 result: The raw numbers
Here are the key numbers from BMW's 2017 financial report. (Note that these were also released in a separate preliminary report on March 8.) All financial results are shown in euros. As of March 21, 2018, 1 euro = about $1.23.
| Metric | 2017 | 2016 | Change |
|---|---|---|---|
| Revenue | 98.678 billion | 94.163 billion | 4.8% |
| Autos sold | 2,463,526 | 2,367,603 | 4.1% |
| EBIT | 9.88 billion | 9.39 billion | 5.3% |
| EBIT margin, automotive segment | 8.9% | 8.9% | unchanged |
| Profit before tax | 10.655 billion | 9.665 billion | 10.2% |
| Net profit | 8.71 billion | 6.91 billion | 26% |
Data source: BMW AG. EBIT = Earnings before interest and tax.
Image source: BMW AG.
Coming this year: More high-profit BMW SUVs
A year ago, CEO Harald Krueger said that BMW would boost production of high-profit SUVs to help fund the development of battery-electric and self-driving vehicles. Now, we're starting to see that plan become reality.
Speaking at a news conference following the company's release of its 2017 annual report, Krueger said that all-new versions of BMW's X2 and X4 crossovers will come to market this year. In addition, BMW is ramping up production of the all-new version of its huge-selling X3 that it launched late last year.
In total, Krueger said, BMW will bring 20 "new and revised" models to market in 2018.
Coming later on: New BMW electrics
Krueger said that BMW will present show-car versions of several upcoming all-electric models this year:
Over the course of the year, we will present a number of pure-electric concept vehicles that will all go into series production, like: The first all-electric BMW – the iX3. Our new technology flagship, the BMW iNEXT, the captivating BMW i Vision Dynamics, which I just announced in Geneva as the BMW i4. We will produce both the iNEXT and the BMW i4 in Germany. These models are proof of our innovative strength.
BMW plans to launch about a dozen battery-electric vehicles between now and 2025, across its three automotive brands. (BMW owns the Mini and Rolls-Royce brands.) An electric Mini, due next year, will be joined by a fully electric version of the X3 crossover in 2020. An all-out high-tech BMW luxury sedan based on the iNEXT show car will follow in 2021.
The BMW Vision Next 100 concept vehicle may be a preview of an upcoming all-electric flagship BMW called the iNEXT. The iNEXT is expected to go into production in 2021. Image source: BMW AG.
The new technology in these vehicles won't come cheap. Krueger noted that BMW's capital expenditures (capex) and spending on research and development (R&D) were both up big in 2017. They were:
- Capex of 4.69 billion euros was up 25.6% from 2016, and was 4.8% of its total revenue for the year.
- R&D of 6.11 billon euros represented an increase of 18.3% from 2016, and was 6.2% of its 2017 revenue.
CFO Nicholas Peter said that both could rise further in 2018. Capex could be as much as 5% of BMW's 2018 revenue, and R&D spending will likely come in between 6.5% and 7% of revenue.
BMW's 2018 guidance: Another good year ahead
Despite the big spending plans, Peter noted that the company met all of its guidance for 2017, with a record profit -- and it expects the good news to (mostly) continue in 2018.
In 2018, we will set the course for continued growth. Despite substantial upfront investments in future technologies and high positive valuation effects in 2017, we are targeting Group earnings before tax at least on par with the high level of the previous year.
Specifically, for 2018, BMW expects:
- A "slight" increase in automotive deliveries (2017 result: 2,463,526)
- Automotive segment EBIT margin between 8% and 10% (2017: 8.9%)
- A "solid" increase in motorcycle deliveries (2017: 164,153)
- A "slight" decrease in return on equity in its financial services segment (2017: 18.1%)
- Profit before tax "at least on par" with 2017 (2017: 10.65 billion euros)
The takeaway for investors: Big profit growth isn't likely for BMW in the near term. But BMW is taking steps to earn enough to give investors at least a little bottom-line growth while funding its efforts to remain competitive (and strongly profitable) in the future.
