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Bmw Group Remains On The Offensive: 2004 The Most Successful Year In The Group's History


March 2005
 Filed under: BMW CORPORATE Car News | BMW CORPORATE Headlines

Positive outlook for business

Munich. The BMW Group continued the successful course of previous years in 2004. Despite adverse global economic conditions, the Group achieved new highs for car sales volume, revenues and earnings. As a result, 2004 has been the most successful year to date in the Group's history. "The BMW Group has continued to strengthen its earnings power and competitive position over the past year", commented Helmut Panke, Chairman of the Board of Management of BMW AG at the Annual Accounts Press Conference in Munich on 16 March. "The success achieved during the past year shows that our product and market initiative is now paying off and generating the desired results."
The BMW Group delivered a total of 1,208,732 cars in 2004, an increase of 9.4% compared to the previous year (2003: 1,104,916 cars). The Group profit from ordinary activities, at euro 3,554 million, surpassed the previous year's figure by 10.9% (2003: euro 3,205 million). The net profit grew by 14.1% to euro 2,222 million and therefore also reached a new high (2003: euro 1,947 million). Earnings per share were euro 3.30 (2003: euro 2.89) per share of common stock and euro 3.32 (2003: euro 2.91) per share of preferred stock. Despite the currency impact, revenues in 2004, at euro 44,335 million, were 6.8% higher than in the previous year (2003: euro 41,525 million). The return on sales at a group level thus improved by 0.3 percentage points to 8.0% (2003: 7.7%).

Capital expenditure will remain at high level
The BMW Group will continue to strengthen its competitiveness through substantial capital expenditure: "The expected increase in cash flows over the coming years enables us to invest heavily in the future of the Group", continued Panke. Against this background, some euro 19 billion will be used over the coming five-year period to expand operations. At the same time, it will generate cash flow surpluses on the back of the earnings and financial strength provided by the Group's operating activities.

Sales volume increase for all brands in 2005
The BMW Group continued its strategy of expanding the range of vehicle and is now represented in all relevant premium segments of the international car markets with the BMW, MINI and Rolls-Royce brands. The BMW X3, the BMW 6 Series Coupé and Cabrio models and the BMW 5 Series Touring were all launched during the first half of the year. The product range was further broadened in the second half of 2004 with the introduction of the BMW 1 Series and the MINI Convertible.

The BMW Group will also introduce a host of new models in 2005. Following the new BMW 3 Series, which became available on 5 March, the revised BMW 7 Series, the high performance BMW M5 and BMW M6 models and the BMW 130i will all be introduced to the market during the course of the year. In addition, from spring onwards, the dynamic four-wheel xDrive system will be available for the first time in a BMW sedan, namely in the BMW 525xi and 530xi.

Against the background of the product initiative, the BMW Group aims to achieve new car sales volume highs in 2005 with all three brands. "Today, the BMW Group has a larger product portfolio to offer its customers than ever before. Moreover, the BMW brand has the youngest range of automobiles in the premium segment", said Panke. Overall, the BMW Group forecasts that the sales volume will grow in the high single-digit range.

Some adverse factors will arise in 2005 as a result of a combination of increased market competition, the effect of the US dollar exchange rate and an above-average increase in the price of important raw materials. Despite these adverse factors, the BMW Group aims for 2005 to achieve approximately the high earnings level of 2004.

Profitable growth with two new model series
As already announced, the BMW Group will continue to expand its range of vehicles by launching two new model series. The Group will thus open up opportunities to increase sales volume and profitability in the future by taking advantage of the increasingly differentiated development of the various segments of the international automobile markets.
Both of the new series will contribute actively to the future growth of the BMW Group and thus enhance the value of the business.

One of these future model series will give a new meaning, in typical BMW fashion, to the concept of space; the combination of functionality and variability means that this product will differ from everything that has been on offer before. Driver and passenger alike will experience a newly defined and individualised sense of space, combined with the dynamic driving performance and elegant, sporty look of a BMW. The second of the two new model series will bring together the raised seating arrangements and four-wheel drive qualities of a Sports Activity Vehicle with the exterior feel of a coupé and the driving characteristics of a sporty passenger car. The two new models should be ready for launch from 2008 on.

Dividend increase
In the light of the high level of profitability and the expectation that 2005 will also progress successfully, the Board of Management and the Supervisory Board will propose an increased dividend at the Annual General Meeting to be held on May 12, 2005. Subject to approval, the unappropriated profit available for distribution in BMW AG of euro 419 million (2003: euro 392 million) will be used to pay a dividend of euro 0.62 for each common stock share (2003: euro 0.58), 6.9% higher than in the previous year, and a dividend of euro 0.64 for each preferred stock share (2003: euro 0.60), 6.7% higher than in the previous year.

Share buy-back proposed
In addition, the Board of Management and the Supervisory Board of BMW AG will propose a resolution at the Annual General Meeting authorising the buy-back of up to 10% of the Company's share capital. The aim of this measure is to reduce the company's share capital by withdrawing the shares from circulation.

This is commensurate with the sustainable ability to generate profits from operations. The positive development of cash flows over the past years has enabled the BMW Group to accumulate a substantial level of cash funds and to achieve a solid equity ratio. Cash flow will continue to grow dynamically over the coming years.

Further increase in workforce
The BMW Group had a workforce of 105,972 employees at the end of 2004, 1.6% more than one year earlier (104,342). Adjusted for transfers and disposals of group entities, the BMW Group therefore created 1,722 new jobs in 2004, of which more than three quarters were in Germany. The workforce here increased by 1.8% to 80,005 employees (2003: 78,569). The BMW Group recruited almost 2,000 new employees for the BMW Leipzig plant, many of whom were working for training purposes at other BMW locations during 2004.

Substantial expenditure for research and development
Research and development costs amounted to euro 2,334 million, an increase of 8.8% compared to the previous year (2003: euro 2,146 million). This represents 5.3% (2003: 5.2%) of revenue. Research and development costs include amortisation and disposals of capitalised development costs amounting to euro 637 million (2003: euro 583 million).

Total research and development costs amounted to euro 2,818 million (2003: euro 2,559 million). This figure comprises research costs, development costs not recognised as assets and capitalised development costs. This gives a research and development expenditure ratio of 6.4% (2003: 6.2%).

Capital expenditure remains at a high level
The BMW Group invested euro 3,226 million in property, plant and equipment and intangible assets in 2004 (2003: euro 3,249 million). In addition, development expenditure of euro 1,121 million (2003: euro 996 million) was recognised as assets in accordance with IAS 38, so that total capital expenditure for 2004 amounted to euro 4,347 million, equivalent to an increase of 2.4% compared to the previous year (2003: euro 4,245 million).

At 39.8% (2003: 38.9%), the proportion of development costs recognised as assets is still relatively low for the industry. Including capitalised development costs, the capital expenditure ratio (i.e. the ratio of capital expenditure to group revenues) was 9.8% in 2004, and was thus below the record ratio reported for the previous year (10.2%).

Cash flow for the year, at euro 5,167 million (2003: euro 4,490 million), jumped by 15.1% and, as in previous years, exceeded capital expenditure. Free cash flow in 2004 increased to euro 547 million (2003: euro 136 million) as a result of increased cash inflows. The increase reflects the further improvement in financial strength brought about by the successful implementation of the BMW Group's product and market initiative.

Sales volume well above previous year's level in virtually all markets
The USA continued to be the market with the largest sales volume, with a total of 296,521 cars sold in 2004, 7.0% more than in the previous year (2003: 277,037 cars). No European automobile manufacturer sold more vehicles in the USA in 2004 than the BMW Group. The BMW Group's sales volume in Western Europe rose to 707,012 units (+10.8% / 2003: 637,949 units). Whilst the overall car market in Germany grew by just one percent in 2004 compared to the previous year, the BMW Group was able to increase its sales volume in this market to 283,586 units (+10.9 % / 2003: 255,821 units). In Asia, the number of BMW, MINI and Rolls-Royce brand cars sold in 2004 rose by 2.5% to 95,360 units (2003: 93,030 units).

BMW brand crosses the one-million threshold
With 1,023,583 cars sold in 2004, BMW brand crossed the one-million threshold for the first time, an increase of 10.3% compared to the previous year (2003: 928,151 cars). 39,247 BMW 1 Series cars were delivered to customers between September 2004 and the year-end.

The fourth generation of the BMW 3 Series has been the most successful series in the group's history: more than three million new cars of this series have been sold in the period from 1998, when the current series' predecessor was launched, up to the end of 2004. A total of 449,732 BMW 3 Series cars was sold worldwide in 2004, 14.9% less than in the previous year, the reduction being attributable to model life-cycle factors (2003: 528,358 units).

More BMW 5 Series were delivered to customers in 2004 than ever before: 229,598 units of the BMW 5 Series models were sold, 23.8% more than in the previous year (2003: 185,481 units).
Demand for the new BMW 6 Series Coupé and Convertible models, launched in January and March respectively, remains strong. 12,332 of the 6 Series Coupé and 8,708 of the 6 Series Convertible had been sold by the end of the year.

In its fourth year of production, the worldwide sales volume of the 7 Series was 47,689 units (-17.6% / 2003: 57,899 units). In Germany, the BMW 7 Series has now moved into first place in the luxury class and, with 7,671 new vehicle registrations, is the market leader in the segment for large sedans.

Demand for the BMW X5, now in its fifth full year of production remained at a high level with a sales volume of 104,988 (-0.5% / 2003: 105,554 units). More than 433,000 units of this Sports Activity Vehicle have been sold since its market launch in 1999. The BMW X3 was introduced onto the market in January 2004 and by the year-end, a total of 92,248 units had been delivered to customers. 38,483 BMW Z4 Roadster were sold in 2004, 18.2% less than in the previous year (2003: 47,049 units).

Successful market launch for the MINI Convertible
Altogether, sales of MINI brand cars rose to 184,357 units in 2004, an increase of 4.5% compared to the previous year (2003: 176,465 units). Sales of the starter model MINI One went up by 6.8% to 47,641 units (2003: 44,623 units), bolstered by the sales volume of the diesel version, MINI One D, with 16,726 units sold. The MINI Cooper remained the best-selling MINI model, with a sales volume of 77,532 units (-11.3%/ 2003: 87,378 units). The top model, the MINI Cooper S achieved a sales volume of 40,443 units (-9.0% / 2003: 44,641 units). The MINI Convertible was launched in July 2004 and is now available with three engine options. A total of 18,741 units had been sold by the end of the year.

100 years of Rolls-Royce motor cars
The Rolls-Royce Phantom is the world's indisputable market leader in the super-luxury segment. During 2004, Rolls-Royce Motor Cars handed over 792 Rolls-Royce Phantoms to customers (2003: 300). A special centenary model, limited to 35 cars, was created to celebrate the 100th anniversary of the Rolls-Royce brand. Production of the Phantom with a longer wheel-base will commence in autumn 2005.

Serial production of a four-seat Rolls-Royce Convertible is now planned as a result of the positive response to the experimental vehicle, the 100EX. Like the Rolls-Royce Phantom, this new motor car will use aluminium-space-frame chassis technology and will be powered by a V12 engine.

Transitional year for the Motorcycles segment
The difficult economic conditions on the international markets also affected the BMW Group's motorcycles business in 2004. With a sales volume of 92,266 units, the record figure set in 2003 (92,962 motorcycles) was missed by just 0.7%, the first time in eleven years that the previous year's sales volume was not surpassed. This development can be attributed primarily to model life-cycle factors relating to the existing Boxer models.

In 2005, the BMW Group will rigorously pursue its strategy of launching new products for the Motorcycles segment. The new travel touring bike, the R1200 RT, was launched at the beginning of the year and the R1200 ST (the successor model to the R1150 RS) will follow a few months later. The K1200 R, which received much acclaim at the INTERMOT trade fair, will become available to customers during the second half of 2005.

Continuing growth for the Financial Services segment
The Financial Services segment was again able to expand business successfully. The business volume of the segment in balance sheet terms rose by 13.6 % to euro 32,556 million (2003: euro 28,647 million). The volume of new customer financing contracts rose by 19.1% to euro 20,759 million, and hence a new record level (2003: euro 17,423 million). The proportion of new BMW and MINI cars financed by the Financial Services segment in 2004 rose to 42.0% (2003: 38.3%).

Sharp increase in car production volume
The BMW Group set a new record for car production volume in 2004 in its worldwide production network, thus laying the basis for the sharp increase in sales volume. Overall, 1,250,345 BMW, MINI and Rolls-Royce brand cars were manufactured in 2004 (+11.7% / 2003: 1,118,940 units).

In total, 1,059,978 BMW cars were manufactured worldwide in 2004, a production volume increase of 12.3% (2003: 944,072 cars). In addition, 189,492 MINI brand cars left the Oxford plant, an increase of 8.7% (2003: 174,366 cars).
Furthermore, 875 Rolls-Royce Phantoms were manufactured by Rolls-Royce Motor Cars in Goodwood, England, an increase of 74.3% (2003: 502).

Sales network further expanded
As part of the implementation of its market initiative, the BMW Group further expanded its international sales network in 2004 and is now represented in 34 countries via its own sales companies. More than 120 countries are handled by local importers.

The creation of additional subsidiaries creates the optimal conditions for the BMW Group to exploit the potential of each individual market, particularly in the converging European market. For example, the BMW Group set up a new subsidiary in Hungary with effect from 1 May 2004 and a further sales company started operations in Portugal on 1 January 2005.

At present, the dealer organisation for the BMW brand comprises more than 3,000 locations around the world. By the end of 2004, the number of locations serving the MINI brand had increased to almost 1,500 which means that the MINI brand is present in 75 countries. The worldwide retailing network for Rolls-Royce motor cars is now virtually complete. Vehicles are currently being retailed by 68 dealers around the world.
* * *
The full Annual Report for 2004 is available for download at www.bmwgroup.com.

For questions please contact:

Corporate Communications
Eckhard Wannieck, Finance Communications
Telephone: (+49 89) 382-24118, Fax: (+49 89) 382-24418
Marc Hassinger, Business and Finance Communications
Telephone: (+49 89) 382-23362, Fax: (+49 89) 382-24418
Media Website: www.press.bmwgroup.com
e-mail: presse@bmwgroup.com
The BMW Group - an Overview

2004 2003 Change in %
Vehicle production
Automobiles 1,250,345 1,118,940 11.7%
Thereof: BMW units 1,059,978 944,072 12.3%
MINI units 189,492 174,366 8.7%
Rolls-Royce units 875 502 74.3%
Motorcycles units 93,836 89,745 4.6%

Deliveries to customers
Automobiles 1,208,732 1,104,916 9.4%
Thereof: BMW units 1,023,583 928,151 10.3%
MINI units 184,357 176,465 4.5%
Rolls-Royce units 792 300 164.0%
Motorcycles units 92,266 92,962 -0.7%

Workforce at the end of the year1 105,972 104,342 1.6%

Cash flow euro million 5,167 4,490 15.1%

Revenues euro million 44,335 41,525 6.8%
Capital expenditure euro million 4,347 4,245 2.4%
Profit from ordinary activities euro million 3,554 3,205 10.9%
Thereof: Automobiles euro million 3,159 2,761 14.4%
Motorcycles euro million 31 50 -38.0%
Financial Services euro million 515 452 13.9%
Reconciliations euro million -151 -58 160.3%
Income taxes euro million 1,332 1,258 5.9%
Net profit euro million 2,222 1,947 14.1%
Earnings per share2 euro 3.30 / 3.32 2.89 / 2.91 14.2% / 14.1%
1 Figures exclude suspended contracts of employment, employees in the work and non-work phases of pre-retirement part-time arrangements and low income earners. After adjusting for disposals and transfers of group companies, the comparable number of employees was 104,250 employees at 31 December 2003.
2 Earnings per share in accordance with IAS 33 for common and preferred stock shares

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