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BMW Australia profit jumps

Heavy hitter: Sales across BMW’s X line of SUVs, headed by the X5, increased in 2013 to help drive strong range growth.

Last year saw BMW Australia post a strong profit, but a much busier 2014 awaits

20 May 2014

BMW AUSTRALIA’S profit jumped 67 per cent to $46.6 million in 2013 thanks to solid sales growth and positive moves in foreign exchange rates.

Revenues for the Bavarian brand’s local distributor were up 6.3 per cent to $1.51 billion as sales of both BMW and Mini badged vehicles outstripped market growth.

“BMW Australia Ltd enjoyed another strong year in 2013, with 20,522 registrations of BMW cars, an increase of 11.5 per cent versus the previous year,” directors said in the annual report.

While its volume-selling 3 Series remained steady, posting a sales increase of 1.3 per cent, other core models such as the X1 (up 44.0 per cent), X3 (up 14.2 per cent), X5 (up 18.9 per cent) and 1 Series (up 20.4 per cent) performed well.

Meanwhile the Mini brand lifted sales 5.9 per cent to 2535 units.

“A key success to the Mini result was the continuing strength of the Mini Hatch, even in the current model’s final year of sales,” directors said. The new-generation version went on sale last month.

But while the hatch and its Clubman derivative posted 11.6 per cent growth, the Coupe/Roadster, Countryman and Cabrio all slipped. The new Paceman added 103 incremental sales.

The ultra-exclusive Rolls-Royce marque slipped from 22 to 16 limousines in 2013.

BMW motorcycle sales were up 3.4 per cent to 2325 despite a drop of two per cent in the market segment in which they compete.

BMW is bracing for a very active year in 2014, with a hectic launch schedule mapped out across its BMW and Mini brands.

This year the company has already launched models including the the X5 25d variant (including a first-time rear-drive version), 4 Series convertible, 2 Series coupe and new Mini hatch, with the M3 sedan and M4 coupe, 4 Series Gran Coupe fastback, X4 crossover, 2 Series MPV and all-electric i3 still to come.

As reported, BMW Australia managing director Phil Horton split the marketing and sales functions into separate departments in September last year.

The marketing department will be headed by Toni Andreevski while the sales operations will be overseen by Tom Noble.

An interesting aspect of the result was the contribution made by the company’s retailing operations.

BMW Australia owns BMW Melbourne in Southbank and BMW Sydney in Chatswood.

The Sydney operation posted a boom result, more than doubling profit from $3.21 million to $6.66 million, while the Melbourne outlet saw its result ease from $3.75 million to $3.22 million.

BMW Australia once again did not pay a dividend to its German parent company, but the company did pay an annual fee of $9.58 million (previously $9.33 million) for the distribution rights in Australia.

Inventories swelled from $291 million to $371 million but directors demonstrated some confidence by reducing the provision for warranty and service costs to $20.7 million ($32.2 million).

BMW Australia’s reliance on imports from Europe and other countries leaves it exposed to currency fluctuations, and the annual report shows how sharp those fluctuations can be.

The company’s currency hedging reserve – where it books the surplus or loss on outstanding hedging contracts – swung from a deficit of $183 million at the end of 2012 to a surplus of $151 million.

The hedging contracts are valued each balance date, but the surplus or loss is only put through the income statement when the contract concludes and the difference between book value and market value is realised.

Despite the big jump in profit, income tax went down from $19.7 million to $18.6 million due to overprovision for tax in earlier years.

Another BMW group company, BMW Australia Finance, reported a lower profit of $63.9 million (previously $86.0 million) for 2013.

BMW Australia Finance provides retail and wholesale financing for new and used motor vehicles.

Directors described it as a “strong” result, but said the decline in earnings reflected an increase in losses on receivables (bad debts).

They also said the result was also affected by an increased rate of growth in BMW sales and the competitive car retailing environment, which meant that the company had to pay a higher level of dealer commissions.

Dealer commissions jumped from $43.8 million to $69.9 million while the write-downs on loans rose from $26.4 million to $46.3 million.

The company’s total assets rose 12 per cent to $6.23 billion while total loan receivables rose 7.3 per cent to $5.72 billion.

Directors said profit margins were likely to stay strong in 2014 as the company continued to have good access competitive funding. They said they were also exploring new ways to access potential customers.

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