BMW 2007 Annual Report Download - page 12

10 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
13 General Economic Environment
17 Review of Operations
41 BMW Stock and Bonds
44 Disclosures relating to Takeover
Regulations and Explanatory Report
47 Financial Analysis
47 – Internal Management System
49 – Earnings Performance
51 – Financial Position
52 – Net Assets Position
55 – Subsequent Events Report
55 – Value Added Statement
57 – Key Performance Figures
58 – Comments on BMW AG
62 Risk Management
68 Outlook
BMW Group on course despite difficult
conditions
The BMW Group continued to perform successfully
in 2007 despite difficult conditions. By achieving
a sharp sales volume increase, the company has
again confirmed its position as the leading provider
within the premium segments of the automobile
markets. External factors did, how ever, continue to
affect reported figures adversely. The continuing
weakness of the US dollar and the Japanese yen,
the generally high cost of raw mate rials and less
favourable financing conditions all continued to have
a negative impact. This was exacerbated by costs
of market launches for numerous new models.
In its automobile business, the BMW Group
registered new sales volume records for all three
brands in 2007. For the first time ever, sales volume
exceeded 1.5 million units, with a total of 1,500,678
BMW, MINI and Rolls-Royce brand cars sold. This
represented an increase of 9.2 % over the previous
year. As expected, automobile business gained
pace particularly during the second half of 2007 fol-
lowing the introduction of numerous new models.
The motorcycles business also remained firmly
on course in 2007 despite divergent developments
on the major motorcycle markets. In total, 102,467
BMW motorcycles were delivered to customers,
representing a new sales volume record for the
BMW Group (+2.4 %).
The Financial Services business continued to
grow profitably in 2007, again making an important
contribution to the overall performance of the BMW
Group. As predicted, the general deterioration in
business conditions in the face of higher financing
costs and the intensely competitive market situation
continued to have an adverse impact in 2007. These
external factors were successfully countered by
achieving dynamic growth with new products, pur-
suing a strategy of targeted regional expansion and
exploiting synergy benefits wherever possible.
External factors again significantly influenced
the amounts reported as Reconciliations in 2007.
Settlement of the exchangeable bond on shares in
Rolls-Royce plc, London, which was completed in
2007, resulted in a gain of euro 97 million in 2007,
compared to one of euro 372 million in the previous
year. In addition to this, losses had to be recognised
on other derivative financial instruments, in particular
on stand-alone interest rate derivatives. A changed
market interest rate structure caused the fair values
of these financial instruments to decrease.
Dynamic revenues growth, earnings targets
achieved
Revenues of the BMW Group rose at an above-aver-
age rate on the back of a pleasing sales volume per-
formance and thanks to the dynamic growth of its
financial services business. Group revenues rose to
euro 56,018 million in 2007 and were therefore up
by 14.3 % on a year-on-year comparison. Excluding
the exchange rate impact, revenues would have
risen by 17.6 %. The BMW Group profit before tax,
at euro 3,873 million, was 6.1 % below the record
level achieved in the previous year. Excluding the
effect of the settlement of the exchangeable bond
on shares in Rolls-Royce plc, London, pre-tax earn-
ings were, as forecasted, slightly above the previous
year’s level.
Automobile business revenues reached a new
high level. They rose by 12.7 % to euro 53,818 mil-
lion, underlining the overall strength of business
operations. Despite the impact of adverse foreign
exchange factors and high raw material prices, the
Automobiles segment reported a profit before tax
of euro 3,232 million, 7.3 % up on the previous year.
Motorcycles business revenues fell short of the
previous year, dropping marginally to euro 1,228 mil-
lion (– 2.9 %). However, process optimisation and
efficiency improvement programmes implemented
in the past continued to have a positive impact,
enabling the segment to increase its profit before tax
by 7.6 % to euro 71 million.
Financial services business continued to grow at
an extremely dynamic pace, with revenues rising by
25.8 % to euro 13,940 million. This strong growth is
reflected in the segment profit before tax which, at
euro 743 million, was 8.5 % up on the previous year.
Segment earnings improved despite increasingly
difficult refinancing conditions.
Business tax reform in Germany had a positive
impact on earnings, reducing the tax expense sharply.
The effective tax rate for 2007 fell by 11.2 percentage
points to 19.1 % (2006: 30.3 %).
The Group net profit of euro 3,134 million
at-
tained a new high level, surpassing the previous year’s
figure by 9.0 %.
Increased dividend proposal
The Board of Management and the Supervisory Board
will propose to shareholders at the Annual General
Meeting to use the unappropriated profit available
for distribution in BMW AG, amounting to euro
694 million, to pay an increased dividend of euro 1.06
Group Management Report
A Review of the Financial Year