BMW 2006 Annual Report Download - page 63

62 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to §289 (4)
and §315 (4) HGB
43 Financial Analysis
43 – Internal Management System
44 – Earnings performance
46 – Financial position
48 – Net assets position
50 – Subsequent events report
50 – Value added statement
53 – Key performance figures
54 – Comments on BMW AG
58 Risk Management
62 Outlook
The economic environment in 2007
The BMW Group predicts that the global economy
will lose some of its momentum in 2007, with the
growth rate tailing off towards the end of the year,
but that it will nevertheless continue to grow overall
at a high level. Higher interest rates across the board
and the persistent high level of oil prices are, in the
meantime, beginning to have an impact. For the
year as a whole, it is forecast that prices will remain
at a similarly high level compared to 2006. Although
marginally lower global demand for oil and the fact
that new production and refinery capacities are com-
ing on line do not point to a sharp increase in prices,
the oil market will nevertheless remain strained and
consequently subject to volatility.
In 2007, the US economy is not expected to
grow as fast as in recent years. However, even taking
a sharp rise in interest rates, higher energy and raw
material prices and a more sluggish property mar-
ket into account, it is still not expected to weaken
significantly. Growth rates are also likely to drop
slightly in Japan and the euro region. Nevertheless,
the overall economic situation in these regions still
remains robust. In the euro region, it is most likely
to be Germany that will put the brake on the growth
rate, with consumer spending, already on the weak
side, being held down by the value added tax increase.
The emerging markets of Asia, Eastern Europe and
Latin America will continue to grow strongly. Here,
too, the global slow-down will, however, result in
slightly lower growth rates.
Economic outlook for the automobile industry
in 2007
The fast-growing Asian markets will continue to give
impetus to the global automobile economy in 2007.
These markets will continue to grow dynamically,
albeit at a slightly slower pace. China’s and India’s
automobile markets will continue to expand, with
high growth rates in the double-digit range.The
equivalent markets in Latin American will also enjoy
another year of strong growth.
By contrast, the triad of traditional car markets
(USA, Japan and Western Europe) will again generate
little momentum; the overall forecast here is one of
market stagnation. In Germany, purchases brought
forward into 2006 may even cause a small contraction
of the market in 2007.
Motorcycle markets still developing divergently
The motorcycle markets relevant to the BMW Group
(500 cc plus) are forecast to register a low growth
rate in 2007, with the individual markets developing
divergently. Stronger growth is expected in the
Southern European countries.
Interest rates to remain at high level
Interest rates rose sharply in 2006 and will remain
at that high level throughout 2007. Within the euro
region, the European Central Bank is expected to
continue to raise interest rates. For the US dollar re-
gion, the BMW Group anticipates that the US Federal
Reserve Bank will increase rates again by the second
half of the year at the latest.
Outlook for the BMW Group in 2007
Within the economic parameters described above,
the BMW Group expects overall that it will continue
to make good progress in the financial year 2007.
The sales volume of the Automobiles segment
is forecast to rise further, with each of its three
brands – BMW, MINI and Rolls-Royce – expected to
achieve new high levels. Seasonal effects will again
be evident during the year, albeit reflecting an oppo-
site pattern to the year 2006. Whilst sales volume
growth is likely to be on the moderate side during
the early months of the year, it should be much
stronger during the second half of the year.
Adverse external factors attributable to the for-
eign exchange impact and to higher raw material
prices will continue to affect the reported earnings
of the Automobiles segment in 2007. Nonetheless,
the BMW Group aims to improve segment profit
before tax, given that the continuing positive trend
in sales volumes, plus the benefit of on-going effi-
ciency improvement measures, will help profitability.
As far as the motorcycles business is con-
cerned, the BMW Group forecasts that the individual
markets will continue to develop extremely diver-
gently in 2007. Numerous new models, the related
entry into new segments and intensified market
activities will again have a positive impact on busi-
ness development. Efficiency improvement pro-
grammes will be continued on an on-going basis,
thus contributing to sustainable profitable growth.
The BMW Group’s Financial Services business
will continue to grow in 2007. It will, however, be
Outlook