BMW Group adjusts outlook to difficult market conditions

BMW Group has adjusted its outlook to difficult market conditions with the risk provision expense increased to 695 mln euros, an expense of 107 mln euros for personnel measures, higher raw material costs, negative market environment in the second half of the year and an improvement at operating level in the first half of year.
Business conditions for the automobile industry have deteriorated sharply over
the past weeks, the Munich-based auto giant said. Rising oil and raw material prices, the weakness of the US dollar, the impact of the international financial crisis and a weaker US economy have made business conditions significantly more difficult.
As a result of the ongoing global financial crisis, the price level of pre-owned cars has dropped and consequently the revenues that can be generated on vehicles returned at the end of leases have not recovered. As a result of higher risk provisions and allowances for residual value risks and bad debts relating to financial services business, an additional expense of EUR 695 mln – including the 236 mln recorded in the first quarter – has been recognised on the Group’s total portfolio. Expenditure in connection with previously announced measures to reduce the size of the workforce amounted to EUR 107 mln in the first half of the year.
The profit before tax for the six month period, at 1,243 mln euros (first half-year 2007: 1,917 mln), was down by 35.2%. Group net profit fell by 25.8% to 994 mln euros (first half-year 2007: 1,340 mln). As a result, the company has adjusted its profit forecast for 2008.
The BMW Group is aiming to achieve a return on sales for the year of at least 4%. An EBIT margin of approximately 4% or higher is forecast for the Automobiles segment. Excluding the exceptional impact of higher risk provision and personnel expense, the BMW Group improved in operating terms.