BMW Announces 9% Rise in Net Profit for 2007

BMW Posts Strong Results, But Dollar Weakness and Other Profitability Pressures Remain

BMW has published another strong set of financial results for the 2007 calendar at a press conference at the company's Munich base. The company's net profit rose by 9.0% year-on-year (y/y) to 3.134 billion euro (US$4.87 billion), in comparison to 2.874 billion euro the year before, although this figure was positively influenced by the one-time effect of corporate tax changes in Germany. The company suffered a dip in its profit before tax of 6.1% y/y to 3.873 billion euro in comparison to the figure of 4.124 billion euro for the full year 2006. However, this figure was influenced by settlement of the exchangeable bond in shares in the British aviation engine manufacturer Rolls-Royce. When this one-off settlement is factored into the results, BMW's profit before tax is 0.6% y/y higher. Profit before interest and taxation (EBIT) rose by 4.0% y/y to 4.212 billion euro, from 4.050 billion euro. These profit figures reflect the pressure being put on financial results this year as a result of rising raw material costs and the continuing weakness of the U.S. dollar against the euro. This is especially the case when BMW announced that group revenues climbed by 14.3% y/y to 56.018 billion euro in comparison to 48.999 billion euro in 2006. Despite the lower-than-anticipated overall margins, BMW Chairman Norbert Reithofer commented, "2007 was a successful year for the BMW Group. We achieved all the targets that we had set ourselves. Even though 2007 was another successful financial year, we have to make sure that the BMW Group is fit for the future in the light of the major challenges that we are facing. 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."

The Number ONE strategy was announced last year and involves BMW's corporate plan through to 2020. As a result, the BMW Group will look to increase profitability and shareholder value over the next decade while looking to consolidate its position as the world's number-one carmaker. This position was certainly consolidated in terms of revenue and sales growth throughout 2007. The BMW Group's 14.3% y/y increase was driven by large gains in the car group's sales volumes, which rose by 9.2% in 2007 across the group's three brands, including BMW, Mini, and Rolls-Royce, to the final figure of 1,500,678 units, in comparison to 1,373,970 units in 2006. This meant that the BMW Group achieved its 2007 target of upper-single-digit percentage sales growth that it announced at the beginning of last year. Car group revenue growth comfortably exceeded sales volume growth, which was a positive sign and signified a higher average unit cost on every BMW Group vehicle sold in the market. BMW's Car Group revenues increased by 12.7% y/y to 53.818 million euro, up from 47.767 million euro in 2006. BMW stated that one of the main drivers of the increased passenger car sales was its ”EfficientDynamics” technology package that is now being fitted to its mainstream, best-selling model ranges such as the 1-Series and 3-Series lines, which includes stop/start engine technology, intelligent aerodynamics, and low-friction tyres packaged with the company's efficient engine technology. BMW said that over 450,000 BMW and Mini vehicles had been sold with the technology in 2007, and this figure is expected to rise to 800,000 units in 2008. In terms of BMW's global car sales the main growth drivers were the 3-Series, which continued to benefit from an ever-expanding model range, its combined sales volumes rising 9.2% to 555,219 units in 2007. The second-generation X5 sport utility vehicle (SUV) also posted a highly significant sales increase of 60.1% y/y to 120,617 units in its first full year on sale.

Outlook and Implications

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