BMW 2007 Annual Report Download - page 52

50 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
13 General Economic Environment
17 Review of Operations
41 BMW Stock and Bonds
44 Disclosures relating to Takeover
Regulations and Explanatory Report
47 Financial Analysis
47 – Internal Management System
49 – Earnings Performance
51 – Financial Position
52 – Net Assets Position
55 – Subsequent Events Report
55 – Value Added Statement
57 – Key Performance Figures
58 – Comments on BMW AG
62 Risk Management
68 Outlook
on the BMW Group investment in TRITEC Motors
Ltda., Campo Largo. These shares were sold to
the Chrysler Group in 2007. The net positive result
from investments decreased by euro 35 million. Net
interest expense improved by euro 31 million. Within
the net interest result, the net negative amount re-
sulting from unwinding the discounting on pension
obligations and recognising income for the expected
return on pension plan assets improved by 3.8 % on
a year-on-year basis.
As a result of the changes in the financial result
described above, profit before tax fell by 6.1 % com-
pared to the previous year. The pre-tax return on
sales was 6.9 % (2006: 8.4 %). Excluding the impact
of the settlement of the exchangeable bond on
shares in Rolls-Royce plc, London, and the fair mar-
ket loss on the option obligation, the profit before tax
improved by 0.6 % to euro 3,776 million.
The Group net profit was euro 260 million or
9.0% above the figure reported in the previous year.
The significantly lower effective tax rate is due to
effect of the Business Tax Reform Act 2008 and the
resulting decrease in deferred taxes.
The Automobiles segment recorded a 9.2 %
increase in sales volume and a 12.7 % increase in
revenues. Segment profit improved by 7.3 % to euro
The positive net amount from other operating in-
come and expenses fell by 11.9 % compared to the
previous year. Other operating income decreased
primarily as a result of lower income from the reversal
of provisions. Other operating expenses increased
slightly by euro 13 million or 2.5 %.
The profit before financial result increased by
euro 162 million (4.0 %) against the previous year
and therefore reached a new high level.
The financial result deteriorated by euro 413 mil-
lion, of which euro 445 million relates to the line
Other financial result. As stated above, earnings in
2006 included a gain of euro 372 million resulting
from the partial settlement of the exchangeable bond
on shares in Rolls-Royce plc, London. Further con-
versions in 2007 gave rise to a gain of euro 97 mil-
lion. The bond was completely settled by the end
of 2007. In addition to the gain on the exchangeable
bond, other financial result also includes losses on
other derivative financial instruments, in particular
stand-alone interest-rate derivatives. A changed
market interest rate structure caused the fair values
of these financial instruments to decrease. The net
result from using the equity method improved by
euro 36 million. This was primarily attributable to
an impairment loss recognised in the previous year
Group Income Statement
in euro million 2007 2006
Revenues 56,018 48,999
Cost of sales – 43,832 – 37,660
Gross profit 12,186 11,339
Sales and administrative costs – 5,254 – 4,972
Research and development costs – 2,920 – 2,544
Other operating income 730 744
Other operating expenses – 530 – 517
Profit before financial result 4,212 4,050
Result from equity accounted investments 11 – 25
Other financial result – 350 99
Financial result – 339 74
Profit before tax 3,873 4,124
Income taxes – 739 – 1,250
Net profit 3,134 2,874