Frankfurt am Main, March 26, 2021 -- Moody's Investors Service ("Moody's") has today
changed the outlook on the ratings of Bayerische Motoren Werke Aktiengesellschaft
(BMW) to stable from negative. Concurrently, Moody's
has affirmed all ratings of BMW and its subsidiaries, including
BMW's long-term issuer rating of A2 and its short-term
Prime-1 (P-1) commercial paper rating.
A full list of affected ratings can be found at the end of this press
release.
"The change in outlook reflects the continued recovery in global
light vehicle sales, the expectation that BMW will be able to further
improve is credit metrics in 2021, and the company's ability
to comply with stricter CO2 emission targets in 2021." said
Matthias Heck, a Moody's Vice President -- Senior Credit
Officer and Lead Analyst for BMW. "The rating affirmation
balances the company's strengths as well-established and
leading global premium automotive manufacturer, with the overall
challenges in the automotive industry, especially its high cyclicality
and the trend towards electrification." added Mr.
Heck.
RATINGS RATIONALE
The outlook change to stable reflects Moody's expectation of a continued
recovery in global light vehicle sales which Moody's expects to
lead to an annual increase in global light vehicle sales of 7%
in 2021 and 6% in 2022, despite short-term challenges
in the first half of 2021, such as the delayed vaccination process
in many countries and the shortage in semiconductor supply. On
the back of this recovery, BMW should be able to improve Moody's
adjusted EBITA margins towards 7% in 2021 (3.0% in
2020), maintain debt/EBITDA (Moody's adjusted) well below
1.5x (1.0x in 2020), and generate positive free cash
flow (Moody's adjusted) also in 2021. The stabilization also
reflects BMW's considerable reduction of its fleet CO2 emissions
to below the stricter CO2 targets in the EU in 2020 (approximately 99
grams versus the regulatory limit of 104 grams), and the expectation
of full compliance also in 2021.
The rating affirmation reflects as positives BMW's (1) proven track
record of successful launches of innovative products across vehicle segments,
which have in the past lead to one of the highest and the most stable
margins among global original equipment manufacturers, albeit these
have been under pressure since 2018; (2) strong capital structure
and conservative financial policy that should enable the company to weather
future significant technological challenges; and (3) decent liquidity
profile, with available cash sources covering expected cash needs
for the next 12 months.
At the same time, the ratings are constrained by (1) the cyclical
nature of the industry in which the group operates with additional pressure
due to the Coronavirus pandemic on top of already slowing global growth;
(2) continued sales incentives; (3) higher raw material prices;
(4) challenges resulting from Brexit; and (5) trade tensions between
the Government of the United States and its main trading partners in Europe
and China, which might, however improve somewhat under the
new US administration. Moody's further recognises a number
of challenges that the automotive industry is facing, in particular
those related to connectivity, autonomous driving, alternative
propulsion technologies, vehicle safety regulations, emissions
and fuel economy as well as new market entrants. Moody's
expects BMW and its peers to require ongoing sizeable investments over
the coming years to weather these challenges.
Moody's expects that the group's set up in China, where
it has built significant local production, will be a key contributor
to the recovery as this market returns to more normal levels. Moody's
also expects a recovery of market volumes in Europe (+11%)
and North America (+6%) in 2021. As a result of this
recovery, Moody's expects that BMW will improve its EBITA
margins (Moody's adjusted) towards 7% in 2021, which
is the minimum for the A2. From 2022, Moody's expects
a continued recovery in volumes and EBITA margins to at least 8%,
which will position BMW comfortably in the A2 category. In terms
of debt/EBITDA (Moody's adjusted), BMW has remained well in
line with expectations for the A2 (1.0x in 2020, versus a
maximum of 1.5x for the A2). With the expected recovery
in margins, Moody's expects that BMW will even further improve
its leverage metrics in 2021 and 2022.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Negative pressure would build if BMW failed to return to meaningful operating
profit generation in 2021. A prolonged and deeper slump in demand
than currently anticipated leading to higher demand in liquidity,
a more severe deterioration of its balance sheet and a longer path to
restoring credit metrics in line with an A2 credit rating could also lead
to negative pressure on the rating. Moody's would consider
a downgrade if BMW's adjusted EBITA margin remained below 7%,
debt/EBITDA exceeded 1.5x or the company failed to generate material
positive free cash flows (Moody's-defined).
A recovery in metrics to pre-outbreak levels could lead to positive
rating pressure. More specifically an adjusted Debt/EBITDA of sustainably
below 1x and an adjusted EBITA margin of sustainably above 8% could
lead to upward rating pressure.
LIST OF AFFECTED RATINGS:
..Issuer: Bayerische Motoren Werke Aktiengesellschaft
Affirmations:
.... LT Issuer Rating, Affirmed A2
....Commercial Paper, Affirmed P-1
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)A2
....Other Short Term, Affirmed (P)P-1
Outlook Actions:
....Outlook, Changed To Stable From
Negative
..Issuer: BMW Australia Finance Ltd.
Affirmations:
....BACKED Senior Unsecured Medium-Term
Note Program, Affirmed (P)A2
....BACKED Other Short Term, Affirmed
(P)P-1
Outlook Actions:
....Outlook, Changed To Stable From
Negative
..Issuer: BMW Canada Inc.
Affirmations:
....BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed A2
Outlook Actions:
....Outlook, Changed To Stable From
Negative
..Issuer: BMW Finance N.V.
Affirmations:
....BACKED Commercial Paper, Affirmed
P-1
....BACKED Senior Unsecured Medium-Term
Note Program, Affirmed (P)A2
....BACKED Other Short Term, Affirmed
(P)P-1
....BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed A2
Outlook Actions:
....Outlook, Changed To Stable From
Negative
..Issuer: BMW International Investment B.V.
Affirmations:
....BACKED Commercial Paper, Affirmed
P-1
....BACKED Senior Unsecured Medium-Term
Note Program, Affirmed (P)A2
....BACKED Other Short Term, Affirmed
(P)P-1
....BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed A2
Outlook Actions:
....Outlook, Changed To Stable From
Negative
..Issuer: BMW Japan Finance Corp.
Affirmations:
....BACKED Senior Unsecured Medium-Term
Note Program, Affirmed (P)A2
....BACKED Other Short Term, Affirmed
(P)P-1
....BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed A2
Outlook Actions:
....Outlook, Changed To Stable From
Negative
..Issuer: BMW US Capital, LLC
Affirmations:
....BACKED Commercial Paper, Affirmed
P-1
....BACKED Senior Unsecured Medium-Term
Note Program, Affirmed (P)A2
....BACKED Other Short Term, Affirmed
(P)P-1
....BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed A2
Outlook Actions:
....Outlook, Changed To Stable From
Negative
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Automobile Manufacturer
Industry published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062773.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
COMPANY PROFILE
Headquartered in Munich, Germany, Bayerische Motoren Werke
Aktiengesellschaft (BMW) is a leading premium European car manufacturer,
producing and selling the BMW, MINI and Rolls-Royce brands,
as well as motorcycles. In addition, the company's financial
services business offers leasing, retail and dealership financing
and holds a bank license through its wholly owned subsidiaries,
BMW Bank GmbH and BMW Bank of North America (bank deposits Aa3/Prime 1).
In the year ending December 2020, the group generated revenue of
around €99 billion.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Matthias Heck, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Anke Rindermann
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
