Speech by Dr. Helmut Panke Member of the Board of Management of BMW AG Annual Accounts Press Conference of the BMW Group 19 March 2002

Transcription

1 - Check against delivery - Member of the Board of Management of BMW AG BMW Group Financial Statements 2001 Highlights 2001 Ladies and Gentlemen, 1. Introduction Key figures on an IAS basis The BMW Group can look back on by far the best results in the Group s history. The profit from ordinary activities rose by 9.5 % to euro 3,242 million in the fiscal year Net profit for the year increased by 54.3 % to euro 1,866 million. The return on sales, on a pre-tax basis, also climbed sharply to 8.4 %. In the previous year, it had been 5.4 %. Company Bayerische Motoren Werke Aktiengesellschaft Postal Address BMW AG D München Telephone +49 (0)89 / Internet Key figures on an HGB basis All of these figures and ratios are based on the Group Financial Statements in accordance with International Accounting Standards. But even on the basis of the Group Financial Statements in accordance with HGB basis (i.e. German GAAP) we also managed to achieve all the targets which we set for the fiscal year In the case of the BMW Automobiles segment, our target was to match the previous year s profit from ordinary activities of euro 2,380 million in spite of the higher level of expenditure for the product and market offensive. We actually surpassed that mark by achieving a profit from ordinary activities in 2001 of euro million. On an HGB basis, the Group s

2 Date Page 2 profit from ordinary activities increased by 65.2 % to euro 2,748 million and the net profit improved by 57.0 % to euro 1,611 million. The pre-tax return on sales of 7.3 % was well ahead of our forecast. In the previous year, it had been only 4.7 %. As far as the equity ratio is concerned, we are now rapidly heading back in line with plan to 1998 s high level of 21.0 %, which had then dipped to 10.5% in 1999 after recognition of provisions for the restructuring of Rover. In 2001, the equity ratio on an HGB basis jumped by 3.5 percentage points to 17.2 % poised to catch up with the 1998 level. I will now move on from analysing the figures on an HGB basis. All of my comments from now on will be based on figures in accordance with International Accounting Standards. Highlights in 2001 First of all, the main highlights: The focus on premium brands is improving the Group s results Our pursuit of a consistent premium brand strategy is one of the main reasons why the BMW Group was largely able to avoid the effects of the adverse

3 Date Page 3 economic situation on the international markets in All of the segments reported improved results All of the Group s segments contributed to the improved Group result. The largest increase was due to the discontinuation of the Rover Automobiles segment. Substantial expenditure for product and market offensive The BMW Group continued its product and market offensive during the year. The new BMW 3 Series compact, the M3 convertible, the updated BMW 3 Series and the X5 4.6is were all successfully introduced into the market on a worldwide basis and the new BMW 7 Series was launched in Europe. In the second half of 2001, sales of the MINI One and MINI Cooper started, initially in Great Britain, and then, from September, in the rest of Europe. The launch of the BMW 7 Series and the MINI led to a sharp rise in selling costs.

4 Date Page 4 2. The overall performance of the BMW Group First of all, I would like to present a brief overview of the performance of the BMW Group in Deliveries to customers The number of BMW brand vehicles delivered to customers in 2001 rose by 7.1 % to 880,700 units which was a new record level for deliveries in one year. This growth was mainly attributable to the strong demand for the various models of the BMW 3 Series and the market success of the Sports Activity Vehicle BMW X5. In the period from July 2001, when sales were started, through to the year-end, some 25,000 MINI brand vehicles were delivered to customers, 10,650 of them in Great Britain. The sales volume of BMW Motorcycles (including the C1) increased by 17.3 % to 95,350 units. The largest contribution to this increase was achieved on the French market with 8,000 units being delivered (+ 39,2 %). Approximately 30,000 units were sold on the German market, an increase of 12.2 %. Deliveries to customers by model The continued appeal and popularity of the BMW 3 Series was confirmed in 2001 by an increase in sales volume of 4.5 % to approximately 534,000 units.

5 Date Page 5 The number of BMW 5 Series sold was up by 0,5% to 194,000 units, despite the fact that it is now in its sixth year of production BMW X5 cars were delivered to customers, more than double the volume sold in the previous year. In the period between its launch in November and the year end, some 3,000 BMW 7 Series cars were delivered to customers. 29,800 vehicles of the 7 Series predecessor model were sold in Production ended in July The super sports car BMW Z8 achieved a sales volume of 2,200 units. External segment revenue Group revenue grew by 3.3 % in Excluding the sales of Rover Cars and Land Rover made until 9 May and 30 June 2000 respectively in the previous year, Group revenue increased by 14.0 %. Revenue from the sale of BMW brand and MINI brand cars rose by 22.1 % and that of the BMW Motorcycle segment (including the C1) by 14.2 %. By contrast, revenue of the Financial Services segment fell by 13.8 %. This was attributable above all to the fact that lease income was down by about euro 1,0 billion as a result of the restructuring of lease business in Germany, a

6 Date Page 6 measure, however, which led to a higher level of external revenue for the BMW Automobile segment. In line with international practice, revenue also includes the operational interest income of the Financial Services segment amounting to euro 1,277 million (2000: euro 1,312 million). Total segment revenue Revenue of the BMW Automobiles segment went up by 13.1 % to euro 33.5 billion. Internal sales to the Financial Services segment fell by 30.0 %, whereby this fall was compensated by increased external sales. Revenue of the BMW Motorcycles segment exceeded one billion euros for the first time. Sales rose by 14.1 % to approximately euro 1.1 billion. Revenue of the Financial Services segment fell by 12.4 % for the reasons which I have explained earlier. External segment revenue by geographical region Excluding the revenue of the Rover Automobiles Segments in the previous year, revenue in Germany rose by 13.5 % to euro 10.2 billion. This revenue was achieved with a sales volume of approximately 241,000 BMW brand and 5,000 MINI brand cars. The BMW brand was therefore able to maintain its previous year s level against a general decline in the market as a whole. BMW increased its market share in Germany from

7 Date Page % in the previous year to 7.1 % in In the rest of Europe, after adjustment for the sales of the Rover Automobiles segment, revenue grew by 20.5 % to euro 11.8 billion. Approximately 288,200 BMWs were sold, which is 20,100 units or 7.5 % more than in the previous year. In addition, some 19,800 MINIs were sold for the first time. The BMW Group performed well in terms of revenue and volumes on virtually all European markets. The fastest growth rate was seen in Great Britain with a 31.1% surge in sales. The Group sold 80,250 BMWs there, which was 17.4 % more than in the previous year. On top of that, 10,650 MINIs were sold in the first six months after the launch. The markets in France, Italy, Spain and Switzerland also contributed strongly to the sales growth of the BMW Group. On an adjusted basis, revenues in America increased by 12.4 % to euro 12.2 billion. Once again, the market in the USA developed extremely well, and the BMW Group increased deliveries to customers there by 12.5 % to more than 213,100 units. This represents a sales growth of 10.9 % to euro 11.1 billion. The sales volume in all other markets increased, on an adjusted basis, by 8.7 % and revenue went up by 4.3 %. China proved to be another growth market for

8 Date Page 8 the BMW Group in Asia. The Group sold 5,742 BMWs in China in 2001, 51.2 % more than in the year The markets in South Africa, Australia, the Middle East and Russia all reported volume increase and therefore contributed to the excellent performance of the BMW Group. Capital expenditure by segment Total capital expenditure on intangible assets and property, plant and equipment amounted to euro 3,516 million in 2001 which was euro 735 million or 26.4 % more than in the previous year. This includes development costs amounting to euro 665 million which were recognised as assets. The bulk of the investment, at euro 2.5 billion, was made in Germany. This sharp increase in capital expenditure reflects the implementation of the product and market offensive. In particular in the BMW Automobiles segment, where capital expenditure went up by 28.6 % to euro 3.1 billion, extensive measures were taken to prepare for the launch of new models, to ensure that the Group maintains its technological and innovative leadership and to expand production capacities. Capital expenditure as a percentage of Group revenue went up from 7.5 % in the previous year to 9.1 % in It should be noted that capital expenditure on an IAS basis includes capitalised development costs. The

9 Date Page 9 capital expenditure ratio under IAS is generally higher than under HGB whereas the R&D ratio under IAS is generally lower. Capital expenditure and cash flow As in previous years, capital expenditure has been financed fully out of cash flow. Group cash flow totalled euro 4,202 million (2000: euro 3,779 million), which covered capital expenditure on intangible assets and property, plant and equipment by % (2000: %). Workforce at the yearend At the year-end, the BMW Group employed a worldwide workforce of 97,275 employees, 3.9 % more than at the end of the previous year. After adjustment for the disposal of the supply plant Powertrain Ltd., Bracknell, and the sale of British Motor Heritage in 2001, the equivalent head count in 2000 had been 92,284 employees and the effective increase in 2001 was 5.4 %. Overall, the BMW Group created almost 5,000 new jobs in Gross profit - on an adjusted basis 3. Results from operations of the BMW Group Cost of sales were at the previous year s level in absolute terms. As I have already stated, revenue went up by 3.3 % so that the gross profit increased

10 Date Page 10 at a faster rate than revenue, namely by 14.8 % (or 15.9 % excluding the Rover segment). This improvement in gross profit was due to the fact that cost of sales in the fiscal year 2000 included impairment losses on production facilities at Oxford and Swindon which were not repeated in the fiscal year In line with the treatment of interest income in revenue, cost of sales also includes operational interest expenses of the BMW Financial Services segment amounting to euro 1,162 million (2000: euro 1,279 million). These interest expenses relate to the refinancing of financial services business. The reduction is attributable to the general reduction in interest rates. Sales and administrative costs - on an adjusted basis Sales and administrative costs were almost identical to the previous year. After adjustment for the costs recorded in 2000 by the Rover Automobiles segment, sales and administrative costs increased by 15.5 % as a consequence of business expansion measures and the launches of the MINI and the BMW 7 Series. Research and development costs Research and development costs comprise research costs incurred in the year, development costs not recognised as assets and amortisation/disposals of capitalised development

11 Date Page 11 costs. As a result of the product offensive currently being pursued, research and development costs increased by 15.5 %, well ahead of the sales growth rate. Amortisation and disposals of capitalized development costs amounted to euro 443 million (2000: euro 400 million). Research and development costs recognised as expense in the income statement represented 4.3 % (2000: 3.9 %) of Group revenue. As already mentioned, this ratio is lower than on an HGB basis, since a part of R&D costs are recognised as assets under IAS. The R&D expense recognised for IAS purposes does then, of course, include the expense for depreciating development costs capitalised in previous years. Other operating income and expenses Net operating expenses decreased by euro 212 million or 75.2 % to euro 70 million. Other operating income and expense in the previous year had been affected only minimally by the Rover Automobiles segment. In the fiscal year 2001, other operating income includes higher income from the release of provisions of euro 131 million and gains of euro 75 million on the sale of land no longer required for operational purposes. Other operating expenses in the fiscal 2001 include provisions and impairment losses of euro 103 million as a consequence of the events of 11 September In the previous year,

12 Date Page 12 allocations to the provision for collection, treatment and recovery of end-of-life vehicles and for residual value risks on vehicles had been euro 247 million higher than in Profit from ordinary activities The profit before financial result improved by 62.5% against the previous year and by 34.5 % after adjustment for the impact of the Rover Automobiles segment. The net financial expense for 2001 included losses of euro 120 million on derivative financial instruments not designated as fair value or cash flow hedges. The financial result does not contain any operational interest income or expenses relating to financial services. As explained earlier, these are included in revenue and costs of sales. Overall, as a result of the various factors described above, the profit from ordinary activities increased by 59. 5% or, on an adjusted basis, by 29.2 %. Profit from ordinary activities by segment The BMW Automobiles segment increased its profit from ordinary activities by 2.2 % to the record level of

13 Date Page 13 euro 2,792 million. The discontinuation of the Rover Automobiles segment improved the profit from ordinary activities by euro 755 million. The BMW Motorcycles segment showed an excellent performance, with profit from ordinary activities increasing by 78.8 % to euro 59 million. This improvement was largely due to the success of the update of the boxer models. The profit from ordinary activities of the BMW Financial Services segment improved by 11.1 % to euro 390 million, mainly as a result of higher financing volumes and lower refinancing costs in the second half of the year. Net profit Income taxes on the profit from ordinary activities increased by 67.2 % mainly as a consequence of the higher pre-tax profit. The effective tax rate is 42.4 % compared to 40.5 % in the previous year. Whereas the current tax expense was still 20.9 % of the profit from ordinary activities as in the previous year, the deferred tax expense went up by 1.9 percentage points to 21.5%.

14 Date Page Assets, liabilities and equity of the BMW Group Balance sheet The balance sheet total of the Group (i.e. total assets/total capital employed) went up 3.9 % to euro 51.3 billion. The main factors behind this increase on the assets side were the increased level of noncurrent assets, inventories and other receivables. On the equity and liabilities side of the balance sheet, the main changes occurred in equity and debt. Currency fluctuations only had a minor impact on the balance sheet total. The net profit of the BMW Group improved by 54.3 % from euro 1,209 million in the previous year to euro 1,866 million in Non-current assets Intangible assets increased by 13.1 % to euro 2.4 billion. Within intangible assets, capitalised development costs increased by 10.8 % to euro 2.3 billion. Development costs recognised as assets during the fiscal year 2001 amounted to euro 665 million (2000: euro 636 million). Depreciation and disposals of development costs totaled euro 443 million (2000: euro 400 million). The total carrying amount of property, plant and equipment went up by euro 760 million or 11.5 % to euro 7.4 billion. This was mainly due to increased

15 Date Page 15 capital expenditure of BMW AG and at the Oxford and Goodwood production plants. The reduction in financial assets by 9.9 % to euro 0.8 billion is attributable mainly to the fair value measurement of the investment in Rolls-Royce plc, London. The carrying amount of leased products in the balance sheet was virtually unchanged compared to the previous year. This was attributable to the fact that the significant volume increase in the USA was more or less offset by the reduction in Germany following the restructuring of lease business. Current assets and prepayments Inventories increased by 21.4 % to euro 4.5 billion. This sharp increase was attributable to the general growth of the business and particularly to the build-up of inventory levels in conjunction with the market launches of the MINI and BMW 7 Series. Inventories as a percentage of the balance sheet total increased accordingly by 1.3 percentage points. Trade receivables went up by 7.9 % in line with the general growth of business. The relatively small growth of receivables from sales financing reflects the discontinuation of financing of

16 Date Page 16 Rover and Land Rover vehicles which led to a decrease in receivables from sales financing. Leased products and receivables from sales financing totaled euro 25.3 billion ( : euro 25.0 billion) and together represented 49.4 % ( : 50.7 %) of the balance sheet total. Other receivables increased by 19.4 % to euro 4.2 billion. This is attributable above all to the higher level of receivables from non-consolidated subsidiaries and to the increase in the fair values of derivative financial instruments. Cash and cash equivalents fell by 10.2 % to euro 3.3 billion. The make-up of cash and cash equivalents has changed and now includes a higher proportion of short-term securities. Net financial funds of the Industrial Operations (comprising cash and cash equivalents less debt) increased, however, by euro 181 million to euro 1.5 billion.

17 Date Page 17 Deferred taxes Deferred tax assets went down by 43.6 % to euro 0.8 billion. After allowance for non-recoverability, deferred tax assets of euro 1,315 million ( : euro 1,580 million) were recognised on tax loss carry forwards. Shareholders equity On the equity and liabilities side of the balance sheet, consolidated equity increased by 14.2 % to euro 10.8 billion, mainly as a result of the Group net profit of euro 1.9 billion and the issue of employee shares of euro 24 million. Against this, the payment of the dividend for the fiscal year 2000, exchange rate fluctuations and the accounting treatment of financial instruments reduced equity by euro 552 million. The equity ratio of the BMW Group improved by 1.9 percentage points to 21.0 %. The equity ratio for Industrial Operations was 37.0 % compared to 35.9 % at the end of the previous year. The equity ratio for Financial Operations improved by 0.3 percentage points to 8.4 %. Non-current assets (excluding leased products) are covered % ( : 98.2 %) by shareholders equity. Provisions Provisions recognised in the balance sheet decreased by 1.4 % to euro 6.8 billion, mainly as a result of the utilisation of provisions for obligations and

18 Date Page 18 risks from the discontinuation of Rover operations. Against this, other provisions increased as a result of the general growth of business and increased obligations relating to personnel. Liabilities and deferred income Debt increased only by 2.5 % to euro 25.7 billion, largely as a result of the moderate increase in sales financing business. Debt as a percentage of the balance sheet total fell by 0.6 percentage points to 50.1 %. Debt relating to Industrial Operations, accounts for only 7.0 % (2000: 5.4 %) of the balance sheet total. Trade payables and other liabilities are in line with the previous year. 5. Earnings per share Earnings per share Earnings per share of common stock were euro 2.78 in 2001 compared to euro 1.80 in the previous year; earnings per share of preferred stock were euro 2.80 (2000: euro 1.82).

19 Date Page Appropriation of profit Appropriation of net profit I now come to the dividend. Thanks to the extremely successful year that the BMW Group has had, the Board of Management is proposing to increase the dividend for the fiscal year 2001 by 6 percentage points to 52 % of each share of common stock and 54 % of each share of preferred stock. 7. Prospects To conclude, I will give a brief summary of our expectations for the current year. Despite the difficult economic environment, we believe that the premium segments of the international automobile markets will continue to grow faster than the average. Performance in 2002 will therefore be measured against our results which we achieved in the fiscal year We are confident that we will be able to report improvements in sales volumes, revenue and earnings for the year 2002.