BMW 2006 Annual Report Download - page 55

54 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to §289 (4)
and §315 (4) HGB
43 Financial Analysis
43 – Internal Management System
44 – Earnings performance
46 – Financial position
48 – Net assets position
50 – Subsequent events report
50 – Value added statement
53 – Key performance figures
54 – Comments on BMW AG
58 Risk Management
62 Outlook
Comments on the Financial Statements of
BMW AG
Whereas the Group financial statements are drawn
up in accordance with IFRSs issued by the IASB, the
financial statements of BMW AG are drawn up in
accordance with the provisions of the German Com-
mercial Code (HGB). Where it is permitted and con-
sidered sensible, the principles and policies of IFRSs
are also applied in the individual company financial
statements.The pension provision in the individual
company financial statements, for example, is also
determined in accordance with IAS 19 and the full
defined benefit obligation recognised. In numerous
other cases, however, the accounting principles and
policies in the individual company financial state-
ments of BMW AGdiffer from those applied in the
Group financial statements. The main differences
relate to the recognition of intangible assets, depre-
ciation and amortisation methods, the measurement
of inventories and provisions as well as the treat-
ment of financial assets.
BMW AG develops, manufactures and sells cars
and motorcycles manufactured by itself and for-
eign subsidiaries. These vehicles are sold through
the Company’s own branches, independent dealers,
subsidiaries and importers. The number of cars
manufactured at German and foreign plants in 2006
rose by 3.3% to 1,366,838 units. At 31 December
2006, BMW AG had 76,156 employees, 380 fewer
than one year earlier. Wage earners account for
approximately 53 % of the workforce.
In 2006, revenues were 1.5 % higher than in the
previous year. Sales to foreign group sales
compa-
nies accounted for euro 30.8 billion, or approximately
73% of the total revenues of euro 42.4 billion. Cost
of sales remained at approximately the same level as
in 2005, and therefore went up at a slightly slower
rate than revenues. The gross profit, at euro 6.1 bil-
lion, was11.6% higher than in the previous year.
Adverse currency factors relating to the US
dollar and Japanese yen, alongside continued in-
tense competition on the automobile markets and
increases in raw material prices, all had a negative
impact on BMW AG’s earnings. By contrast, the in-
crease in the interest rate used to measure pension
provisions (from 4.25% to 4.40%) and the dis-
counted tax reimbursement resulting from a change
in German law with regard to the corporation tax
credit, had a positive effect.
In the financial year 2006, capital expenditure on
intangible assets and property, plant and equipment
totalled euro 1,324 million (2005: euro 1,472 million).
This represents a decrease of 10.1% and was mainly
due to completion of structural investment at the
Leipzig plant.Depreciation and amortisation amounted
to euro 1,765 million.
By 17 February 2006, a total of 20,232,722
shares of common stock had been bought back via
the stock exchange at a total acquisition cost of
euro 758 million, and withdrawn from circulation in
accordance with the resolution taken by the Board
of Manangement on 21 February 2006. Of the total
number of shares withdrawn,13,488,480 shares,
with an acquisition cost of euro 506 million, had al-
ready been held by BMW AG at 31 December 2005.
Equity decreased by the amount of the buy-back
value of the shares withdrawn from circulation.The
equity ratio fell from 25.8% to 23.4%. Long-term
external capital (registered profit-sharing certificates,
pension provisions, the liability to the BMW Unter-
stützungsvereins e.V. and liabilities due after one
year) increased marginally (+1.3%) to euro 4.8 billion.
As in previous years, the cash inflow from
BMW AG’s operating activities was used to finance
subsidiaries.