BMW Group: Second-quarter EBIT of euro 169 million

Reithofer: Good progress with financial and cost management
Lasting economic recovery not yet in sight

Munich. The BMW Group recorded positive earnings in the second quarter 2009 despite the weak state of the global economy. “Our foresighted financial and cost management strategies are paying off“, stated the Chairman of the Board of Management of BMW AG, Norbert Reithofer, on Tuesday in Munich. As with all companies operating in the automobile sector, however, the BMW Group still faces difficult business conditions. “Despite some tentative positive signals, a lasting and wide-ranging recovery is not yet in sight“, continued Reithofer.

The combined effect of the financial and economic crisis on consumer spending on major sales markets and intense competition in the automobile sector is significantly affecting the performance of the BMW Group. Second-quarter revenues decreased to euro 12,971 million (second quarter 2008: euro 14,552 million) as a result of the drop in sales volumes. The BMW Group reports a profit before financial result (EBIT) of euro 169 million (second quarter 2008: euro 425 million). The profit before tax declined to euro 151 million (second quarter 2008: euro 602 million), while the profit after tax amounted to euro 121 million (second quarter 2008: euro 507 million).

Revenues for the six-month period fell to euro 24,480 (first half-year 2008: euro 27,837 million). The Group reports a six-month EBIT of euro 114 million (first half-year 2008: euro 1,252 million) and a loss before tax of euro 47 million (first half-year 2008: profit before tax of euro 1,243 million). The loss after tax was euro 31 million (first half-year 2008: profit after tax of euro 994 million).

The BMW Group was again able to assert its position in the face of generally difficult economic conditions. In this situation, further progress was made in the area of cost management, contributing amongst other things to lower personnel expenditure. Efficiency improvements also had a positive impact.

During the period from April to June, the BMW Group was also able to reduce the Automobiles segment’s inventory and working capital levels. “We managed to generate a positive free cash flow of euro 516 million for the first half of the year”, pointed out Reithofer. In total, the BMW Group’s liquidity increased to euro 11.9 billion at the end of the quarter.

Market climate remains highly volatile / impetus created by new models

Due to the highly volatile state of the markets and uncertainty with regard to future economic developments, it is not possible at present from the BMW Group’s perspective to give a forecast for earnings in 2009. At a sales volume level, the forecast is still for a short-fall compared to the previous year’s high level. Deliveries to customers in the second half of the year are, however, expected to stop the downwards trend registered in the first six months of the year.

Several new models are being launched over the course of the year which will help to boost the sales volume performance. The new BMW 7 Series is now available worldwide. A four-wheel-drive version of the 7 Series will come onto the markets in autumn. The new BMW Z4 was launched in parallel in May. Both of the new models have received a very positive response from customers. The X1 and the 5 Series Gran Turismo will also be introduced to the markets during autumn. The M versions of the BMW X5 and the BMW X6 will be launched in summer.

From 2010 onwards, it is expected that the renewed product range will provide further impetus for business. This trend should be fuelled further between 2010 and 2012 when the new versions of high-selling models come onto the markets. For the year 2012, the BMW Group continues to target a return on capital employed (ROCE) of more than of 26% and an EBIT margin of between 8% and 10% for its Automobile segment.

Focus on sustainability and new technologies

The BMW Group set a new strategic course back in 2007 with the adoption of its “Number ONE” Strategy and remains focused on implementing that strategy. All measures and activities currently being undertaken are aimed at future sustainability. “We are pooling technical and financial resources in the areas of sustainability and the development of new technologies“, emphasised Reithofer. “The BMW Group is the world’s leading premium manufacturer in the automobile industry and, in our opinion, “premium” should lead by example. From our perspective, this creates a special accountability for the company, its products, its social commitment and the premium business model that we pursue“, continued Reithofer.

Weak economy hits earnings of Automobiles segment

Similar to developments throughout the automobile sector, the BMW Group’s second-quarter sales volume figures were adversely impacted by the weak state of the world’s economies. The rate of decrease in sales volume did, however, slow down compared to the first quarter. Total sales of BMW, MINI and Rolls-Royce brand cars during the three-month period from April to June fell by 18.1% to 338,190 units (second quarter 2008: 413,087 units). Sales of BMW brand cars decreased by 18.6% to 280,093 units (second quarter 2008: 344,019 units). The number of MINI brand cars sold fell by 15.7% to 57,942 units (second quarter 2008: 68,756 units). 155 Rolls-Royce motor cars were sold during the period (second quarter 2008: 312 units / -50.3%).

In total, 615,454 (first half-year 2008: 764,874 / -19.5%) BMW, MINI and Rolls-Royce cars were sold during the first six months of the year, enabling the BMW Group to maintain its position as the leading premium manufacturer worldwide. The BMW brand increased its share of the premium segment by 0.6 percentage points to 21.1%. Sales of BMW brand cars decreased by 19.4% to 513,591 units (first half-year 2008: 637,569 units). The number of MINI brand cars sold fell by 19.9% to 101,534 units (first half-year 2008: 126,810 units). 329 Rolls-Royce motor cars were sold during the period under report (first half-year 2008: 495 units / -33.5%).

Second-quarter revenues and earnings of the Automobiles segment were adversely impacted by the steep drop in sales volumes in the wake of the global economic crisis and the intense competition in the automobile sector. The segment reports a negative EBIT of euro 31 million (second quarter 2008: positive EBIT of euro 395 million) and a loss before tax of euro 158 million (second quarter 2008: profit before tax of euro 325 million). Revenues fell to euro 10,827 million (second quarter 2008: euro 13,754 million). Revenues of the Automobiles segment for the six-month period fell to euro 20,432 million (first half-year 2008: euro 25,916 million). The segment reports a negative EBIT of euro 282 million (first half-year 2008: positive EBIT of euro 1,014 million) and a loss before tax of euro 629 million (first half-year 2008: profit before tax of euro 864 million).

Sales volume decrease for BMW Motorcycles in second quarter

The difficult climate on the world’s markets was also felt by the Motorcycles segment. The BMW Group sold 29,742 motorcycles during the second quarter, 14.7% fewer than one year earlier (second quarter 2008: 34,886 units). Revenues fell to euro 336 million (second quarter 2008: euro 392 million). Segment EBIT declined to euro 26 million (second quarter 2008: euro 56 million), while the profit before tax was down to euro 24 million (second quarter 2008: euro 53 million). Segment revenues for the six-month period fell to euro 626 million (first-half year 2008: euro 737 million) with EBIT decreasing to euro 54 million (first-half year 2008: euro 92 million). The Motorcycles segment reports a profit before tax of euro 50 million (first-half year 2008: euro 87 million).

The BMW Group continues to expand its motorcycle model range: the new F 800 R has been available since May and the road version S 1000 RR will come onto the markets at the end of the year.

Financial Services segment earnings improved

The Financial Services segment performed well during the period under review within a difficult business environment. Segment revenues increased to euro 4,224 million (second quarter 2008: euro 3,877 million). The profit before tax improved to euro 81 million (second quarter 2008: euro 64 million). Revenues for the six-month period increased to euro 8,227 million (first half-year 2008: euro 7,734 million) while the profit before tax edged up to euro 153 million (first half-year 2008: euro 148 million).

The total volume of all financing and leasing contracts signed with retail customers during the first half of the current year amounted to euro 12,023 million, a decrease of 18.7% compared to the same period one year earlier. Despite the general decrease in new business during the period under report, the number of contracts actually increased overall, with retail customer contracts at the period end up by 9.0% to 2,798,668 units. The proportion of new cars of the BMW Group financed or leased by the Financial Services segment was 47.0%, 0.6 percentage points above the proportion recorded one year earlier. The proportion for the financial year 2008 had been 48.5%.

Workforce reduced

The number of employees decreased further during the period under review. The BMW Group workforce comprised 98,261 employees worldwide at the end of the second quarter 2009 (30 June 2008: 106,027 employees), representing a 7.3% decrease on a year-on-year basis. Compared to 31 December 2008, the number of employees was decreased by 1.8%.

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The full Interim Report to 30 June 2009 is available for download at www.bmwgroup.com/ir.

The BMW Group – an Overview
2nd quarter
2009 2nd quarter
2008 Change
in %
Vehicle production
Automobiles units 306,009 413,711 -26.0
Motorcycles units 21,152 31,972 -33.8

Deliveries to customers
Automobiles units 338,190 413,087 -18.1
Thereof:
BMW units 280,093 344,019 -18.6
MINI units 57,942 68,756 -15.7
Rolls-Royce units 155 312 -50.3
Motorcycles units 29,742 34,886 -14.7

Workforce at end of quarter 98,261 106,027 -7.3

Operating cash flow euro million 987 1,320 -25.2

Revenues euro million 12,971 14,552 -10.9
Profit before financial result
(EBIT) euro million 169 425 -60.2
Thereof:
Automobiles euro million -31 395 -
Motorcycles euro million 26 56 -53.6
Financial Services euro million 75 39 92.3
Other Entities euro million 26 88 -70.5
Eliminations euro million 73 -153 -
Profit before tax euro million 151 602 -74.9
Thereof:
Automobiles euro million -158 325 -
Motorcycles euro million 24 53 -54.7
Financial Services euro million 81 64 26.6
Other Entities euro million 18 342 -94.7
Eliminations euro million 186 -182 -
Income taxes euro million -30 -95 68.4
Net profit euro million 121 507 -76.1
Earnings per share euro 0.18/0.19 0.77/0.78 -76.6/-75.6

1 including G 650X assembly by Piaggo S.p.A., Noale, Italy, excluding Husqvarna Motorcycles (1,993 units).
2 excluding Husqvarna Motorcycles (2,907 units)
3 Automobiles segment
4 for common/preferred stock in accordance with IAS 33.

1 January to 30 June 2009 1 January to 30 June 2008 Change
in %
Vehicle production
Automobiles units 573,646 819,306 -30.0
Motorcycles1 units 50,263 60,561 -17.0

Deliveries to customers
Automobiles units 615,454 764,874 -19.5
Thereof:
BMW units 513,591 637,569 -19.4
MINI units 101,534 126,810 -19.9
Rolls-Royce units 329 495 -33.5
Motorcycles2 units 46,974 55,932 -16.0

Workforce at end of quarter 98,261 106,027 -7.3

Operating cash flow3 euro million 2,109 2,383 -11.5

Revenues euro million 24,480 27,837 -12.1
Profit before financial result
(EBIT) euro million 114 1,252 -90.9
Thereof:
Automobiles euro million -282 1,014 -
Motorcycles euro million 54 92 -41.3
Financial Services euro million 145 118 22.9
Other Entities euro million 38 124 -69.4
Eliminations euro million 159 -96 -
Loss/profit before tax euro million -47 1,243 -
Thereof:
Automobiles euro million -629 864 -
Motorcycles euro million 50 87 -42.5
Financial Services euro million 153 148 3.4
Other Entities euro million 42 337 -87.5
Eliminations euro million 337 -193 -
Income taxes euro million 16 -249 -
Net loss/profit euro million -31 994 -
Earnings per share4 euro -0.05/-0.04 1.52/1.53 -

1 excluding Husqvarna Motorcycles (4.117 units).
2 excluding Motorcycles (4.867 units).
3 Automobiles segment
4 for common/preferred stock in accordance with IAS 33.

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