BMW 2009 Annual Report Download - page 14

12
12 Group Management Report
12 A Review of the Financial Year
14 General Economic Environment
18 Review of Operations
42
BMW Group – Capital Market
Activities
45 Disclosures pursuant to § 289 (4)
and § 315 (4) HGB
48 Financial Analysis
48 Internal Management System
50 Earnings Performance
52 Financial Position
54 Net Assets Position
56 Subsequent Events Report
56 Value Added Statement
58 Key Performance Figures
59 Comments on BMW AG
63 Internal Control System
64 Risk Management
70 Outlook
Group Management Report
A Review of the Financial Year
BMW Group performs well despite
economic crisis
The worldwide economic and financial crisis again had a
major impact on our business in 2009. The steep decline in
demand on key sales markets and unfavourable re financ-
ing conditions on international capital markets were partic-
ularly pronounced during the first half of the year. Manufac-
turers of premium vehicles benefited only to a very minor
extent from the various stimulus programmes established
in many countries to help increase car sales volumes.
The first signs of moderate economic recovery, from which
our automobile business also profited, emerged during
the second half of the year. With a total of 1,286,310 BMW,
MINI and Rolls-Royce cars sold in 2009, we ended the year
10.4 % down on the previous year’s sales volume perform-
ance and within the predicted range of 10 % to 15 %. In-
tense competition and model life-cycle factors also played
a role in reducing sales volumes to below the previous
year’s figures. We were nevertheless able to increase mar-
ket share in the premium segment and retain our position
as the world’s leading premium manufacturer.
International motorcycle markets contracted on average
by roughly one third in 2009. Despite this difficult environ-
ment, we were still able to sell 87,306
BMW motorcycles
worldwide (– 14.1 %), convincingly outperforming the mar-
ket
as a whole.
The weak state of the global economy also cast its shadow
over financial services business in 2009. Ongoing adverse
conditions on the international car markets also caused new
financing and lease business to decline. The situation on
the international used car markets differed greatly from
market
to market. Whereas demand for previously owned
cars stabilised over the course of the year in North America
and the United Kingdom, the situation in Continental
Europe
remained difficult. The economic and financial crisis
was especially reflected in this region in a higher volume
of
bad debts. Narrower risk spreads on the international
capital markets reduced refinancing costs during the year.
Due to the uncertain conditions on international capital
markets, we increased our liquidity levels at the beginning
of 2009. As the financial markets have settled somewhat
and with economic conditions stabilising, we have been
able to reduce those levels. Some of the liquidity raised was
used to externalise the financing of a second tranche of
pension liabilities.
Positive earnings achieved
With the economy performing so weakly, revenues fell
short of their previous year’s level. Group revenues in 2009
totalled euro 50,681 million, 4.7 % down on the previous
year. Excluding the exchange rate impact, revenues would
have fallen by 5.1 %.
Efficiency improvement measures initiated at an early stage
as part of our Strategy Number ONE and rigorous cost
management policies have both helped to enable us to
report positive Group earnings for the full year. A steep
sales volume decline, adverse exchange rate factors and
a difficult competitive environment had a negative impact
on business performance. The BMW Group reports a
profit before financial result ( EBIT ) of euro 289 million
(– 68.6 %). At euro 413 million, the profit before tax was up
by 17.7 % on the previous year.
In line with the sales volume performance, automobile
business revenues fell short of the previous year, dropping
by 10.3 % to euro 43,737 million. Reflecting the weak
state of most of the major car markets, the Automobiles
segment recorded a negative
EBIT of euro 265 million
(2008: positive EBIT of euro 690 million). The slight eco-
nomic recovery in the final months of 2009 resulted in
a resurgence in car sales volume, enabling the segment
to achieve a positive EBIT of euro 93 million in the last quar-
ter
of 2009. The segment recorded a loss before tax of
euro 588 million for the year (2008: profit before tax of
euro 318
million).
The Motorcycles segment generated revenues totalling
euro 1,069 million in 2009, 13.1 % down on the previous
year. The difficult market environment in 2009 pushed
down EBIT by 68.3 % to euro 19 million, with profit before
tax falling to euro 11 million (– 78.4 %).
The total business volume of the Financial Services seg-
ment was similar to that of the previous year, with revenues
of euro 15,798 million (+ 0.5 %). The positive EBIT gen-
erated
by this line of business, at euro 355 million, was well
above the previous year’s level (2008: negative EBIT of
euro 216 million). The pre-tax segment result turned around
from a segment loss before tax of euro 292 million to a seg-
ment profit before tax of euro 365 million. The slight im-
provement in the global economy brought with it lower risk
levels in terms of residual values and within the lending
business. Narrower risk spreads on capital markets nudged
refinancing costs down during the year.
The income tax expense for the year was euro 203 million
(2008: euro 21 million). The sharp increase in the effective
tax rate was due to the lower level of tax-exempt income
and partly to the tax expense incurred for prior years
in con-
junction with a tax field audit at the level of BMW AG,
mostly
relating to intragroup transfer pricing arrangements.
The