Financial Analysts Meeting. March 19, 2008 Dr. Michael Ganal Member of the Board of Management of BMW AG, Finance
Agenda. Review of 2007 Outlook for 2008 Status of the Profitability-Improvement Program
2007 Overview. Group revenues rise 14.3% to 56 billion euros. Group profit before tax totals 3,873 million euros. Net of the effect of the Rolls-Royce exchangeable bond, the Group profit before tax advances 0.6%, despite negative external effects. Profit before the financial result amounts to 4,212 million euros.
Automobiles Segment Overview. million 2007 2006 Change in % Revenues 53,818 47,767 + 12.7 EBIT 3,450 3,055 + 12.9
Effects on Automobile Profit. million 3,055 FX Volume/ mix/market Efficiency gains + 351 Others 167 3,450 517 Raw materials 288 Depreciation 403 + 1,419 2006 Profit before financial result (EBIT) 2007 6.4% 6.4% EBIT margin
Automobiles Segment Overview. million 2007 2006 Change in % Revenues 53,818 47,767 + 12.7 EBIT 3,450 3,055 + 12.9 EBIT margin (in %) 6.4 6.4 - RoCE (in %) 22.8 21.7 + 5.1
Automobiles Segment Return on Capital Employed. 3,450 22.8% RoCE 6.4% EBIT margin 3.6 Capital turnover x EBIT 53,818 Revenues 15,108 Capital employed : : 28,515 Employed assets 13,407 Non-interest bearing liabilities -
Motorcycles Segment Overview. million 2007 2006 Change in % Revenues 1,228 1,265-2.9 EBIT 80 75 + 6.7 EBIT margin (in %) 6.5 5.9 + 10.2 RoCE (in %) 18.2 17.7 + 2.8
Financial Services Segment Overview. million 2007 2006 Change in % Revenues 13,940 11,079 + 25.8 EBIT 717 689 + 4.1 Bus. vol. on the balance sheet 51,257 44,010 + 16.5 Leasing and financing agreements with customers (millions) 2.63 2.27 + 15.8 Penetration rate (in %) 44.7 42.4 + 5.4 RoA (in %) 1.3 1.4-7.1
Financial Services Segment Development of the Credit Loss Ratio. 0.55% 0.50% 0.45% 0.46% 0.46% 0.41% 0.41% 0.40% 0.37% 0.35% 0.30% 2003 2004 2005 2006 2007
BMW Group. Financial Services Segment Resale Value Development in the USA. BMW brand vs. all luxury brands 120 115 110 105 100 95 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 BMW brand All luxury brands Source: Manheim Used Vehicle Value Index, mix and mileage adjusted.
Reconciliations Segment. Profit before tax totals -173 million euros (previous year: 361 million euros) Significant change on balance, primarily due to effects arising in connection with the exchangeable bond.
Gross Profit. million 2007 % 2006 % Change in % Revenues 56,018 100.0 48,999 100.0 14.3 Cost of sales - 43,832 78.2-37,660 76.9 16.4 Gross profit 12,186 21.8 11,339 23.1 + 7.5
Profit before Financial Result. million 2007 % 2006 % Change in % Gross profit 12,186 21.8 11,339 23.1 + 7.5 Sales & administrative costs - 5,254 9.4-4,972 10.1 + 5.7 Research & development costs - 2,920 5.2-2,544 5.2 + 14.8 Other operating income & expenses +200 0.4 + 227 0.5-11.9 Profit before financial result (EBIT) 4,212 7.5 4,050 8.3 + 4.0
Research and Development Costs. million 2007 2006 Change in % R&D costs (income statement) 2,920 2,544 + 14.8 R&D costs share of revenues (in %) 5.2 5.2 - Depreciation - 1,109-872 + 27.2 Capitalization of development costs + 1,333 + 1,536-13.2 Total R&D expenditure 3,144 3,208-2.0 Total R&D share of revenues (in %) 5.6 6.5 Capitalization ratio (in %) 42.4 47.9
Profit before Financial Result. million 2007 % 2006 % Change in % Gross profit 12,186 21.8 11,339 23.1 + 7.5 Sales & administrative costs - 5,254 9.4-4,972 10.1 + 5.7 Research & development costs - 2,920 5.2-2,544 5.2 + 14.8 Other operating income & expenses +200 0.4 + 227 0.5-11.9 Profit before financial result (EBIT) 4,212 7.5 4,050 8.3 + 4.0
Financial Result and Profit Before Tax. million 2007 % 2006 % Change in % Profit before financial result 4,212 7.5 4,050 8.3 + 4.0 Financial result - 339 0.6 74 0.1 - thereof: Result from equity method accounting 11-25 Result on investments - 3 32 Net interest result - 252-283 Other financial result - 95 350 Profit before tax 3,873 6.9 4,124 8.4-6.1
Net Profit. million 2007 % 2006 % Change in % Profit before tax 3,873 6.9 4,124 8.4-6.1 Income taxes -739 1.3-1,250 2.5-40.9 Net profit 3,134 5.6 2,874 5.9 9.0 Effective tax rate (in %) 19.1 30.3 Earnings per share on common stock (euro) 4.78 4.38 + 9.1 Earnings per share on preferred stock (euro) 4.80 4.40 + 9.1
Capital Expenditure. million 5,000 4,000 4,245 4,347 996 1,121 3,993 1,396 4,313 4,267 1,536 1,333 3,000 2,000 1,000 10.2% 9.8% 2,777 2,934 8.6% 8.8% 7.6% 3,249 3,226 2,597 2003 2004 2005 2006 2007 Capital expenditure on property, plant and equipment and on intangible assets Capitalized development costs Capex ratio
Cash Flow and Free Cash Flow Industrial Operations. million 7,000 6,157 6,184 6,340 6,000 5,000 4,000 4,970 3,717 5,373 3,000 2,000 1,000 124 2,042 956 2,291 2003 2004 2005 2006 2007 Cash inflow from operating activities Net interest-bearing assets Free cash flow industrial operations in 2007: 7,052 million (FY06: 5,385 million)
Dividend Development. Dividend* in Dividend total in million Payout ratio 1.2 1.06 700 694 30% 1.0 600 25% 22% 0.8 0.70 500 458 20% 16% 0.6 400 15% 0.4 300 10% 0.2 200 5% 2006 2007 2006 2007 2006 2007 *Per share of common stock.
Conclusion for 2007. BMW Group on the right track despite adverse underlying conditions. Strong business trend; major negative effects more than offset once again. Proof of organic strength and high earning power. Promise kept.
Agenda. Review of 2007 Outlook for 2008 Status of the Profitability-Improvement Program
Outlook for 2008. Currency effects and persistently high raw material prices will continue to affect earnings negatively in 2008 as well. Increased risk triggered by the credit crunch and the US economy. We aim to improve the profit before tax and RoCE in the automobiles business. We will keep the motorcycles business on track for growth. We aim to achieve a positive earnings trend in the financial services segment despite mounting money and capital market interest rates. Our goal is to post a profit before tax net of the effect of the exchangeable bond at the Group level that exceeds last year s figure.
Preview of Segment Reporting. Publication of segment income statements and balance sheets starting in fiscal 2008. Abolishment of the separation of industrial and financial operations. Increased transparence of key figures and internal decision-making.
Key Performance Indicators. BMW Group Automobiles: Return on Capital Employed Motorcycles: Return on Capital Employed Financial Services: Return on Equity
Agenda. Review of 2007 Outlook for 2008 Status of the Profitability-Improvement Program
Natural Hedging. +30% 200k 260k Oxford +60% +47% 150k 240k Spartanburg 30k 44k Shenyang Significant increase in purchasing volume in the NAFTA region (based on 10% in 2007).
Efficiency Improvements. million 6,000 5,000 4,000 3,000 Expenses / fixed costs / R&D 2,000 1,000 Cost of materials / purchasing 0 2008 2009 2010 2011 2012 Cost of materials/purchasing: 4bn or 2/3 of the total potential Expenses/fixed costs/r&d: 2bn or 1/3 of the total potential
Development of the R&D Ratio. 7.0% 6.5% 6.0% 6.2% 6.4% 6.7% 6.5% 5.5% 5.8% 5.6% 5.0% 4.5% 4.9% 4.0% 2001 2002 2003 2004 2005 2006 2007 2012 Average R&D ratio 2001-2007: 6.0% R&D ratio: R&D expenditure (HGB) / revenues
Reduction of Personnel Costs. Reduction of 5,000 temporary workers 2,500 by the end of 2007 BMW Group 107,593 employees 2,500 by the end of 2008 Reduction of 3,100 permanent staff 2,500 in Germany 600 in subsidiaries outside Germany
Development of the Capex Ratio. 11.0% 10.0% 9.0% 9.5% 10.2% 9.8% 8.0% 9.1% 8.6% 8.8% 7.0% 7.6% 6.0% Target: <7% 2001 2002 2003 2004 2005 2006 2007 2012 Average Capex ratio 2001-2007: 9.1% Capex ratio: total capex / revenues
Free Cash Flow Industrial Operations. million 3,000 2,500 2,000 2,291 from 2012: > 2 bn. 1,500 1,000 956 500 2006 2007 2008 2009 2010 2011 2012
Stakeholder Universe of the BMW Group. Charitable Organizations Capital Market NGOs Multinational Institutions Interest Groups Suppliers Stakeholder Universe Neighbors Employees Customers Policymakers & Legislation Media Education, Research and Science
Financial Analysts Meeting. March 19, 2008 Dr. Michael Ganal Member of the Board of Management of BMW AG, Finance