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    Posted: 18-March-2009 at 23:26
BMW GROUP CONFIRMS LONG-TERM TARGETS
18/03/2009

Numerous measures to secure growth and independence
Liquidity, free cash flow and working capital have priority
Group earnings affected by financial and economic crisis
No reliable forecasts possible for 2009

Despite the current challenging economic times, the BMW Group is confirming the long-term targets set out in its Strategy Number ONE. "2009 will be a transitional year for which we cannot yet make any reliable forecasts. Nevertheless, our long-term profitability targets for 2012 remain intact. We want to preserve the independence of the BMW Group," stated Chairman of the Board of Management of BMW AG Norbert Reithofer at the Annual Accounts Press Conference in Munich on Wednesday.

The BMW Group's current assumption is that sales volumes will decrease by 10 to 20 percent in automotive markets over the course of 2009. Reithofer expects the economy to pick up in 2010: "At that point we will also gain additional momentum from our renewed product range. The ramp-up of our highest-volume models between 2010 and 2012 will reinforce this trend."

The company previously forecast a Return on Capital Employed of 26 percent and a return on sales of 8 to 10 percent based on EBIT in the Automobiles segment for the year 2012. In order to meet these targets and to mitigate the impact of the current economic situation as much as possible, the BMW Group responded quickly over recent weeks and months by introducing numerous measures that focus on the company's financial stability and innovative strength.
The BMW Group believes a sound financial footing is what assures the company its freedom of action. That is why the company is giving priority to liquidity, free cash flow and working capital as well as fixed costs and capital expenditure. The BMW Group has worked consistently on its cost structures and continued to improve efficiency.

The innovative strength of the BMW Group is expressed in the innovative, ground-breaking and attractive products which are in demand among customers today, and will also be in demand in the future. The company leads the entire automotive industry in the reduction of CO2 emissions. With an average of 156 grams CO2 per kilometre, the BMW Group's fleet in the EU has much lower emission figures than any other premium manufacturer. Fuel consumption fell 27 percent between 1995 and 2008. No other manufacturer has reduced CO2 emissions by more than the BMW Group.

Substantial improvements at operating level in 2008

The BMW Group's performance held up well under difficult market conditions during the 2008 financial year. The company was able to make improvements at an operating level, although the economic climate had a strong impact on the BMW Group's reported figures for the year. As a result of additional provisions for residual values caused by the weak used car markets, liabilities (euro 1,968 million in total) and one-time personnel expenses of euro 455 million, earnings were reduced by exceptional expenses amounting to euro 2,423 million.
The profit before financial result (EBIT) of the BMW Group fell accordingly to euro 921 million in 2008 (2007: euro 4,212 million/-78.1%). The profit before tax was euro 351 million (2007: euro 3,873 million/-90.9%) while the net profit came in at euro 330 million (2007: euro 3,134 million /-89.5%). Group revenues fell relatively moderately to euro 53,197 million (2007: euro 56,018 million/-5.0%).

Adjusted EBIT margin of 6.3% in the financial year 2008

Adjusted for the exceptional expense for risk provision and personnel costs referred to above, EBIT would have been euro 3,344 million and the EBIT margin would have been 6.3%. Unadjusted, the EBIT margin in 2008 was 1.7%.

High level of exceptional expense recorded in the fourth quarter

The expense recorded in the fourth quarter 2008 for the exceptional items referred to above totalled euro 1,128 million, comprising euro 931 million for risk provisions and euro 197 million for one-off personnel expenses. The negative fourth-quarter EBIT was euro 718 million (fourth quarter 2007: positive EBIT of euro 1,308 million). Net of these exceptional items referred to, the Group would have reported positive EBIT of euro 410 million. Fourth-quarter revenues fell by 18.2% to euro 12,772 million (2007: euro 15,606 million).

Fixed costs reduced / greater savings planned for costs of material

The BMW Group made good progress in 2008 at an operating level, which is reflected in reduced fixed costs and substantial cost savings in the area of purchasing. "We have set ourselves the task, by 2012, of surpassing the euro 4 billion of material cost reductions targeted in conjunction with the strategy Number ONE", announced Reithofer.

Group liquidity strengthened

In addition, the BMW Group's liquidity was further strengthened in 2008, despite the turmoil on the capital markets. Holdings of cash funds and marketable securities increased by 86.3% to euro 8,107 million (2007: euro 4,352 million). The net interest-bearing assets in the Automobiles segment increased to euro 9,046 million, compared to euro 7,354 million in 2007. The Group has therefore been able to start the new business year with a very solid financial position.
"We prepared ourselves early on and swiftly for severe business conditions, for example by taking immediate steps to bring production volumes into line with lower demand, and thus enabling us to further optimise working capital. This is also reflected in reduced inventory levels", emphasised Reithofer. With a negative figure of euro 81 million, the BMW Group was almost able to achieve a break-even free cash flow in 2008 in its Automobiles segment.

Dividend in line with earnings performance

As a result of decreased earnings, the Board of Management and the Supervisory Board will propose to shareholders at the Annual General Meeting on 14 May 2009 that a dividend of euro 0.30 (2008: euro 1.06) be paid on each share of common stock and of euro 0.32 (2008: euro 1.08) on each share of preferred stock. "We want to pay a dividend even in difficult economic times, demonstrating both the confidence we have in our operating strength and the interest in our shareholders", emphasised Reithofer.

EBIT of Automobiles segment down to euro 690 million

The Automobiles segment profit for 2008 was severely affected by the in-creased risk provision for residual value risks and measures to reduce the size of the workforce, totalling euro 1,363 million. EBIT fell by 80.0% to euro 690 million compared to euro 3,450 million one year earlier. The profit before tax fell to euro 318 million (2007: euro 3,232 million /-90.2%). Revenues generated by the Automobiles segment totalled euro 48,782 million (2007: euro 53,818 million /-9.4%). Adjusted for the exceptional items discussed above, the segment EBIT would have been euro 2,053 million. This would be equivalent to an EBIT margin of 4.2% (2007: 6.4%). Unadjusted, the segment EBIT margin in 2008 was 1.4%.
Unsurprisingly in the face of difficult business conditions in 2008, the BMW Group was not able to match the previous year's record sales volume figure. In total, the BMW Group sold 1,435,876 BMW, MINI and Rolls-Royce brand vehicles in 2008 (2007: 1,500,678 units/-4.3%). The Group therefore recorded its second-best annual sales volume figure in its history (behind 2007).
Despite the fact that the whole automobile industry faced huge challenges in 2008, the BMW Group was nevertheless able to achieve new sales volume records for its MINI and Rolls-Royce brands. One of the main contributing factors enabling the sales volume decrease to be kept to a moderate 4.3% was the BMW Group's "Efficient Dynamics" technology which is designed to reduce fuel consumption and CO2 emissions. All new BMW and MINI models are now equipped with this technology as a standard feature. In Europe alone, some 830,000 vehicles equipped with Efficient Dynamics were handed over to customers in 2008.

1,202,239 BMW brand vehicles (2007: 1,276,793 units/-5.8%) were sold worldwide in 2008, well ahead of the volumes achieved by relevant competitors in the premium segment. MINI was again able to increase the number of units sold, thus setting a new sales volume record. In total, 232,425 units were sold, 4.3% more than in the previous year.

Rolls-Royce Motor Cars sold 1,212 units in 2008 (2007: 1,010 units) corresponding to a sales volume growth of 20.0%. This was the fifth annual increase in succession, ensuring that Rolls-Royce remains the undisputed market leader in the ultra-luxury segment.

Motorcycles segment reports EBIT of euro 60 million

The earnings performance of the Motorcycles segment in 2008 was influenced by difficult business conditions. EBIT fell to euro 60 million (2007: euro 80 million/-25.0%) and the profit before tax dropped to euro 51 million (2007: euro 71 million/-28.2%). Revenues totalled euro 1,230 million (2007: euro 1,228 mil-lion/+0.2%). BMW Motorrad was almost able to match its previous year's record sales volume figure despite unfavourable business conditions on the world's motorcycle markets. In total, 101,685 BMW motorcycles (2007: 102,467 units) were sold in 2008 (-0.8%).

Financial Services segment earnings adversely affected by financial crisis

The earnings performance of the Financial Services segment was severely impaired in 2008 by a number of factors, including the recognition of a risk provision expense of euro 1,057 million for residual value risks and bad debts. The segment reported a loss before tax of euro 292 million (2007: profit before tax of euro 743 million). Adjusted for exceptional factors, the segment would have reported a profit before tax of euro 765 million and a return on equity of 19.1% (2007: 18.1%). The Financial Services segment increased its revenues to euro 15,725 million (2007: euro 13,940 million/+12.8%).

The volume of new retail customer contracts rose by 3.1% to euro 29,341 million. The proportion of new BMW and MINI brand cars financed by the Financial Services segment amounted to 48.5%, up by 3.8 percentage points compared to the previous year. This increase was largely attributable to the higher proportion of credit financing, while lease financing remained fairly constant.

Capital expenditure below previous year's level

Capital expenditure, at euro 4,204 million (2007: euro 4,267 million/-1.5%), was lower than in the previous year. The main focus of capital expenditure was on product investments in conjunction with the production start-ups of new models such as the BMW 7 Series, the Z4, the X1 and the MINI Convertible as well as infrastructure investments. Capital expenditure for property, plant and equipment and other intangible assets increased by 1.6% to euro 2,980 million (2007: euro 2,934 million). In addition, euro 1,224 million (2007: euro 1,333 million/-8.2%) of development expenditure was recognised as assets in accordance with IFRS. The capitalisation ratio, at 42.7%, was therefore similar to the previous year's level (42.4%).

Workforce reduced

The number of employees was reduced over the past year as a result of the previously reported personnel-related measures, the sale of business units, normal staff attrition and the expiry of temporary contracts. At the end of 2008, the worldwide workforce comprised 100,041 employees (31 December 2007: 107,539 employees), 7.0% fewer than one year earlier. Approximately 4,000 voluntary employment contract termination agreements had been signed by the end of December. In addition, almost 1,800 posts were reduced following the sale of the Cirquent Group to NTT Data. The number of trainees at the year-end (4,102) remained at a high level (31 December 2007: 4,281).

* * *

The BMW Group - an Overview
2008 2007 Change
in %
Vehicle production
Automobiles 1,439,918 1,541,503 -6.6
Thereof:
BMW units 1,203,482 1,302,774 -7.6
MINI units 235,019 237,700 -1.1
Rolls-Royce units 1,417 1,029 37.7
Motorcycles units 104,220 104,396 -0.2

Vehicle deliveries
Automobiles 1,435,876 1,500,678 -4.3
Thereof:
BMW units 1,202,239 1,276,793 -5.8
MINI units 232,425 222,875 4.3
Rolls-Royce units 1,212 1,010 20.0
Motorcycles units 101,685 102,467 -0.8

Workforce at end of year1 100,041 107,539 -7.0

Revenues euro million 53,197 56,018 -5.0
Capital expenditure euro million 4,204 4,267 -1.5
Operating cash flow2 euro million 4,471 6,246 -28.4
EBIT euro million 921 4,212 -78.1
Thereof:
Automobiles euro million 690 3,450 -80.0
Motorcycles euro million 60 80 -25.0
Financial Services euro million -216 717 -
Profit before tax euro million 351 3,873 -90.9
Income taxes euro million -21 -739 -
Net profit euro million 330 3,134 -89.5
Earnings per share3 euro 0.49/0.51 4.78/4.80 -
Dividend per share of
common/preferred stock euro 0.30/0.32 1.06/1.08 -
1 figures exclude dormant employment contracts, employees in the work and non-work phases of pre-retirement part-time arrangements and low wage earners.
2 Automobiles segment.
3 earnings per share in accordance with IAS 33 for common and preferred stock shares.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote kbannon Quote  Post ReplyReply Direct Link To This Post Posted: 18-March-2009 at 23:28
18.03.2008
BMW Group heading towards a successful year in 2008

Adjusted pre-tax earnings will be above last year’s level
All-time high sales volume levels expected for all three brands

The BMW Group intends to continue its successful business performance in the current year. “We are aiming towards a current year profit before tax -adjusted for the exceptional gain on the settlement of exchangeable bond on shares in the British aero engine manufacturer, Rolls-Royce, in 2007 - that is higher than in the previous year”, said Norbert Reithofer, the Chairman of the Board of Management of BMW AG at the BMW Group Annual Accounts Press Conference in Munich on Tuesday.

The BMW Group plans to achieve new record sales volume figures for all three brands in 2008 and hence to retain its position as the world’s leading premium manufacturer. “The BMW Group expects another record number of deliveries in 2008. We remain well on course to achieving our strategic sales volume target of 1.8 million vehicles in 2012”, continued Reithofer.

The BMW Group again faces some major challenges in the current year as a result of the strong euro, a weaker US economy and continuing high raw material prices. It is also likely to be confronted in the future by stricter emission standards in many countries. The BMW Group has invested several hundred millions of euros in environment-friendly technologies in recent years, enabling and providing the BMW Group a competitive edge over its competitors. Our EfficientDynamics programme offers customers the best technology that is currently available on the market to reduce fuel consumption and CO2 emissions. In 2007, some 450,000 vehicles were sold in Europe alone equipped with EfficientDynamics. This figure is expected to rise in 2008 over 830,000 vehicles.

Number ONE strategy aimed at safeguarding BMW Group’s future

“We are making sure that the BMW Group is fit for the future. All of the measures adopted in conjunction with our Number ONE strategy are aimed at safeguarding the BMW Group’s future and increasing its value”, he emphasised. By 2012, the BMW Group’s Automobiles segment is aiming to achieve a return on capital employed in excess of 26% and a return on sales in a range of 8% to 10%. “Profitability is essential factor in our endeavours to safeguard the future of the BMW Group. It ensures that the necessary financial resources are available and also safeguards our independence”, stressed Reithofer.

BMW Group achieves all of its targets in 2007

The BMW Group achieved all of the targets that it had set itself for the financial year 2007 by posting new record sales volume and revenue figures and an adjusted profit before tax higher than one year earlier. Profit before tax, at euro 3,873 million (2006: euro 4,124 million), was 6.1% down on the record level achieved in the previous year. Adjusted for the exceptional impact of the settlement of the exchangeable bond on shares in the British engine manufacturer, Rolls-Royce plc, the profit before tax, as previously announced, was 0.6% higher than one year earlier. The exceptional gain on the conversion of the remaining options in 2007, at euro 97 million, was significantly lower than the previous year’s gain of euro 372 million. Group EBIT rose by 4.0% to euro 4,212 million (2006: euro 4,050 million).

As a result of the one-time effect of the corporate tax reform in Germany, the net profit also rose by 9.0% to a new all-time high level of euro 3,134 million (2006: euro 2,874 million). The net profit therefore surpassed the three billion euro figure for the first time. Group revenues climbed by 14.3% to euro 56,018 million (2006: euro 48,999 million) on the back of sharp rise in sales volume and thanks to the dynamic growth of financial services business. This means that revenues were able to break through the euro 50 billion barrier for the first time. Operating cash flow rose to 6,340 (2006: 5,373) million euros, resulting in an increase of 18%.

Adverse currency impact of euro 517 million in 2007

The BMW Group again had to face strong headwinds in 2007 caused by unfavourable developments on the foreign exchange and raw material markets. The adverse currency impact totalled euro 517 million (2006: euro 666 million), while higher raw material prices increased costs by euro 288 million (2006: euro 178 million). Efficiency improvement measures and strong business growth, however, enabled the BMW Group to offset this impact to a large extent. The BMW Group forecasts that the adverse currency impact in the current financial year will be lower than in 2007. All of the main currencies are practically fully hedged for the current financial year.

Shareholders to participate significantly more in success of business

The Board of Management and the Supervisory Board will propose at the Annual General Meeting to be held on 8 May 2008 that the dividend per share of common stock be increased by 51.4% to euro 1.06 (2006: euro 0.70) and that the dividend per share of preferred stock be increased by 50.0% to euro 1.08 (2006: euro 0.72). “We also want our shareholders to be able to participate significantly more in the success of the BMW Group in the future”, explained Reithofer.

New authorisation for share buy-back proposed

The Board of Management and the Supervisory Board of BMW AG will propose a resolution at the Annual General Meeting to authorise the buy-back of up to 10% of the Company’s share capital. The authorisation, if resolved, will be valid for a period of 18 months. The buy-back authorisation passed in the previous year remains valid until 14 November 2008. It has not yet been decided whether or the extent to which the new authorisation will be applied to buy back further shares.

Automobiles segment earnings increased in 2007

The profit before taxes of the Automobiles segment for the financial year 2007 improved by 7.3% to euro 3,232 million (2006: euro 3,012 million) despite adverse currency factors and high raw material prices. Segment EBIT improved by 12.9% to euro 3,450 million (2006: euro 3,055 million). The EBIT margin was unchanged at 6.4%. Segment revenues increased by 12.7% to a new all-time high level of euro 53,818 million (2006: euro 47,767 million), therefore growing at a faster pace than sales volume. The return on capital employee (ROCE) improved to 22. 8% (2006: 21.7%).

The total number of BMW, MINI and Rolls-Royce brand vehicles delivered to customers in 2007 rose again to its highest level to date, with the sales volume up by 9.2% to 1,500,678 units (2006: 1,373,970 units). This means that the BMW Group fully achieved the upper single-digit sales growth rate target set for the full year 2007.

One of the major contributing factors for the good performance was the EfficientDynamics package which is helping to reduce fuel consumption and CO2 emissions. Customers are also benefiting from this innovative technology in many MINI models.

1,276,793 BMW brand cars were sold in 2007, surpassing the previous year’s level (2006: 1,185,088 units) by 7.7%. The MINI also recorded good growth with the retail sales volume rising by 18.5% to 222,875 units (2006: 188,077 units). Rolls-Royce increased its sales volume figures for the fourth year in succession and remains the undisputed market leader in the ultra-luxury segment. Rolls-Royce Motor Cars handed over 1,010 vehicles (2006: 805 vehicles) to customers in 2007 (+ 25.5%), therefore achieving a four-figure annual sales volume figure for the first time.

Motorcycles business continues to perform well

The Motorcycles segment’s earnings performance again made good progress in 2007, primarily thanks to process optimisation and efficiency improvements. The segment profit before tax rose by 7.6% to euro 71 million (2006: euro 66 million). Revenues fell by 2.9% to euro 1,228 million (2006: euro 1,265 million) due to the changed model mix. The EBIT margin generated by motorcycle business improved to 6.5% (2006: 5.9%), while the ROCE increased to 18.2% (2006: 17.7%). The sales volume increased by 2.4% to 102,467 units (2006: 100,064 units).

Financial services business continues to perform dynamically

The Financial Services segment continued to perform dynamically in 2007 despite less favourable refinancing conditions. Segment profit before tax, at euro 743 million (2006: euro 685 million), was 8.5% ahead of the previous year. Revenues rose by 25.8% to euro 13,940 million (2006: euro 11,079 million). At the year-end, 2.63 million lease and financing contracts were in place with dealers and retail customers, representing an increase of 15.8%. The proportion of new BMW and MINI cars financed by the Financial Services segment increased to 44.7% (2006: 42.4%).

Capital expenditure almost at previous year’s level

Capital expenditure in 2007 totalled euro 4,267 million (2006: euro 4,313 million) and was therefore almost at the previous year’s level. Capitalised development costs recognised as assets in accordance with IAS decreased by 13.2% to euro 1,333 million (2006: euro 1,536 million) reflecting the lower volume of series development projects. Capital expenditure for property, plant and equipment and other intangible assets increased by 5.7% to euro 2,934 million (2006: euro 2,777 million), partly in connection with the expansion of the production network. The capital expenditure ratio of the BMW Group declined to 7.6% (2006: 8.8%).

Slight increase in workforce

The workforce increased slightly during the year, mainly as a result of the acquisition of Husqvarna Motorcycles and two acquisitions made by the Financial Services segment. At the end of 2007, the worldwide workforce comprised 107,539 employees (31 December 2006: 106,575 employees), an increase of 0.9%.


The 2008 Annual Report can be downloaded here from BMWGroup.com
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