BMW Group aiming for record profit in 2006

Best year in company's history in terms of operating results. Profit
before tax to increase to euro 4 billion. Strong and successful
financial year 2005 Munich. In 2006, the BMW Group is on its way to the
best year in the company's history. "Our target is to achieve a
profit before tax of euro 4 billion in the current financial year at
Group level ", Helmut Panke, Chairman of the Board of Management
of BMW AG announced at the Annual Accounts Press Conference in Munich
on 15 March 2006. This includes the positive impact of a gain arising
from the sale of shares in the British aero engine manufacturer Rolls
Royce plc., amounting to euro 350 million to date. "We will
continue our profitable growth course in the coming years and generate
above-average returns compared to the industry as a whole", Panke
continued. Currency effects and high raw material prices will continue
to have an impact on business development in the current year, however
to a lesser degree than in the previous year. This negative effect is
partly attributable to the fact that we have less favourable currency
hedge rates compared to last year which will have an impact especially
in the first half of 2006. The BMW Group will counter this development
by means of continuous efficiency and productivity improvements. The
targeted sales volume record and improvements in the sales mix will
also make a positive contribute to earnings. "In terms of operating
results, the current year will therefore be the best year in the
company's history to date", Panke emphasised. The BMW Group was
again able to prove its inherent strength in the financial year 2005
despite the difficult conditions the worldwide automotive industry is
facing. Thanks to the clear sales volume increase and on-going
efficiency improvement measures, the negative impact of adverse
currency factors and high raw material prices was almost completely
offset by the year-end. The profit before tax, at euro 3,287 million,
was, as already announced, at approximately the same high level as in
the previous year (2004; euro 3,583 million/-8.3%), thus exceeding
market expectations. Before financial result and taxes (and therefore
excluding the expense of euro 356 million in conjunction with the
exchangeable bond option on shares in Rolls Royce plc), the operating
profit (EBIT) rose by 0.5% to a new record figure of euro 3,793 million
(2004: euro 3,774 million). The net profit, at euro 2,239 million, was
at a similar high level as in the previous year (2004: euro 2,242
million/ - 0.1%). Factors contributing to this development were the
lower tax rates applicable in various countries outside Germany and tax
reimbursements for prior years. Earnings per share were unchanged from
the previous year, at euro 3.33 per share of common stock and euro 3.35
per share of preferred stock. Group revenues rose by 5.2% to a new
high of euro 46,656 million (2004: euro 44,335 million) due to
increased sales volumes and the extremely positive performance recorded
in the financial services business. The pre-tax return on revenues, at
Group level, was 7.0% (2004: 8.1%). "The BMW Group is currently
the premium manufacturer with the highest sales volume in the world and
is also ahead of almost all of its direct competitors in terms of
profitability", Panke underlined. Dividend to increase again In
light of the high level of profitability and the positive outlook for
the new financial year, the Board of Management and the Supervisory
Board will propose a further dividend increase to the Annual General
Meeting on 16 May 2006. The unappropriated profit of BMW AG available
for distribution amounting to euro 424 million will be used to a pay an
increased dividend of euro 0.64 per share of common stock (2004: euro
0.62) and one of euro 0.66 per share of preferred stock (2004: euro
0.64). Authorisation to buy-back shares proposed Furthermore, a
proposal will be made again to the shareholders at the Annual General
Meeting to authorise the buy-back of up to 10% of the Company's share
capital. It has not yet been decided whether or the extent to which the
authorisation will be applied to buy back further shares. The buy-back
programme decided in September 2005 covering 20,232,722 shares of common
stock, or 3% of share capital, was completed on 15 February 2006. In
total, shares were bought back for an amount of approximately euro 759
million, at an average price per share of euro 37.51. By the way of
dividend and share buy-back, the shareholders of the BMW Group will
participate in the success of the company in a magnitude of close to
euro 1.2 billion. Capital expenditure to remain at high level In the
light of the expected continued improvement of cash flow, the BMW Group
will strengthen its competitiveness with a substantial capital
expenditure programme also in the future: some euro 19 billion are
planned to be invested between 2005 and 2009 in order to expand
business operations. At the same time, the BMW Group will continue to
generate cash flow surpluses due to the earnings and financial strength
of its operating activities. Capital expenditure in 2005, at euro 3,993
million, again remained at a high level. This corresponds to a
decrease by 8.1% (2004: euro 4,347 million). Capitalised development
costs according to IAS increased by 24.5% to euro 1,396 million (2004:
euro 1,121 million). A total of euro 2,597 million (-19.5/ 2004: euro
3,226 million) was invested in property, plant and equipment as well as
intangible assets. The increase in capitalised development costs
resulted from the higher number of series development projects carried
out during the year under report. At 44.8% (2004: 39.8%), the
proportion of capitalized development costs is still relatively low for
the industry. Including capitalised development costs, the capital
expenditure ratio in 2005 (i.e. the ratio of capital expenditure to
Group revenues) was 8.6% (2004: 9.8%). Cash flow for the year, at euro
5,603 million (2004: euro 5,187 million), rose by 8.0% and, as in
previous years, exceeded capital expenditure. Free cash flow from
industrial operations increased by 82% to euro 3,717 million as
depreciation on intangible assets and property, plant and equipment
increased and capital expenditure decreased. Sales volume of all
brands at new high level in 2005 The sales volume of all brands reached
new peak figures in 2005. With 1,327,992 BMW, MINI and Rolls-Royce
brand cars sold in the past year, the BMW Group beat the sales volume
record set in the previous year by 9.9% (2004: 1,208,732 cars).
"The product and market initiative is, and will remain, the
decisive factor for the BMW Group's continuing successful performance.
With our product and market initiative, we will continue to pursue our
course of growth and expansion in a determined matter", Panke
emphasised. Due to the strong brand and product portfolio, the company
sees further growth potential for the current year: "We expect the
BMW Group to achieve a new sales volume peak in the 2006 business
year", Panke stated. BMW brand records strong sales volume
increase in 2005 With its core model series, the 3, 5 and 7 Series, the
BMW brand was the worldwide frontrunner in 2005 in each of the relevant
segments. The sales volume of the core brand rose by 10.1% to 1,126,768
(2004: 1,023,583) units. With a total of 149,493 units sold, the BMW 1
Series met high demand in its first full year of production (2004:
39,247 units). The BMW Group's best-selling car, with 229,932 units
sold, was the new 3 Series Sedan available since March 2005. This model
accounted for 17% of the total sales volume for 2005. In total, 434,342
units of the BMW 3 Series were sold worldwide last year. This means
that, despite the model changes of the two best-selling variants -the 3
Series Sedan and the 3 Series Touring - the previous year's sales
volume was nearly reached (-3.4%/2004: 449,732 units). With 228,389
units sold in 2005, the BMW 5 Series nearly matched the previous year's
high level as well (-0.5%/ 2004: 229,598 units). The number of BMW 6
Series cars sold went up by 10.9% to 23,340 units, well above the
previous year' s level (2004: 21,040 units). In the luxury class, a
total of 50,062 BMW 7 Series cars were delivered to customers (2004:
47,689 units), an increase of 5.0%. The BMW X3 recorded strong growth:
the number of Sports Activity Vehicles delivered rose by 20.0% to
110,719 (2004: 92,248) units. The BMW X5, in its sixth year since
market launch, continued to meet strong demand, and with 101,537
vehicles sold, almost achieved the previous year's high level
(-3.3%/104,988 units). In total, more than 250,000 BMW cars sold in 2005
were equipped with xDrive, thus representing the most successful
four-wheel drive system within the premium segment. The sales volume of
the Z4 in 2005, at 28,808 units, was below the previous year's level
(-25.1%/38,483 units). The BMW Group presented the updated model of
this Roadster in January. In early summer, the Z4 family will be
supplemented by the Z4 Coupé and the M-version. More than
200,000 MINI brand cars sold for the first time in a single year For
the first time, more that 200,000 MINI brand cars were sold in a single
year, with the number of cars delivered increasing by 8.7% to 200,428
(2004: 184,357) units. The product mix of the closed version of the
MINI and of the MINI Convertible increased in value again compared to
the previous year. The brand's top model, the MINI Cooper S, recorded
the most pronounced growth, with sales volume rising by 25.8% to 56,916
(2004: 45,246) units or 28.4% of the total sales volume of the MINI.
The MINI Cooper remained the most popular model with a sales volume of
89,079 units (+1.4%/2004: 87,875 units) or 44.4% of the total sales
volume of the MINI. 54,433 or 27.2% of our customers opted for the
starter model, Mini One (+6.2%/2004: 51,236 units). Since market launch
in 2001, more than 730,000 MINI cars have been delivered to customers.
Rolls-Royce maintains its top position in the absolute luxury class
The Rolls-Royce brand maintained its top position in the absolute luxury
class. 796 Phantoms were delivered to customers, slightly more than the
792 sold in the previous year. An extended wheelbase version was
presented in March 2005. This stretched model was initially introduced
to the Middle East and Asia /Pacific regions and will be introduced to
the American market in the course of 2006. Motorcycles sales volume
also increases significantly The Motorcycles segment was also able to
achieve growth due to its new models: The sales volume for the full
year rose by 5.6% to 97,474 (2004: 92,266) units, with the R 1200 GS, R
1200 RT and K 1200 S contributing especially to the sales performance.
Financial Services still on growth course The BMW Group expanded its
activities in the Financial Services segment and remained on growth
course in 2005. The total business volume of the Financial Services
segment as disclosed in the balance sheet at 31 December 2005 increased
by 24.4% to euro 40,428 million (31 December 2004: euro 32,556
million). For the first time, the total portfolio of lease and financing
contracts surpassed the two million mark in 2005 and, with exactly
2,087,368 contracts in place, was 13.2% above the total number one year
earlier. At 41.1%, the proportion of new BMW and MINI cars financed by
the Financial Services segment in 2005 was marginally lower than in the
previous year (2004: 38.3%). Car sales volume well above previous
year's level in virtually all markets The USA continued to be the
market with the largest sales volume for the BMW Group, with a total of
307,020 cars sold in 2005, up by 3.7% (2004: 296,111 cars). The BMW
Group therefore remains the most successful European premium automobile
manufacturer operating in the American market. The number of cars sold
by the BMW Group in Western Europe increased by 9.7% to 707,800 units.
Germany remained, by far, the most important European market. In total,
295,872 vehicles (2004: 283,559 vehicles) were sold, corresponding to a
growth rate of 4.3%. In Asia, sales volume rose by 16.9% in 2005 to
111,469 units (2004: 95,376 units). Car production volume increased
Due to the higher sales volume, the BMW Group also achieved new peak
figures in production volume: in total, 1,323,119 BMW, MINI and
Rolls-Royce brand cars were manufactured, an increase of 5.8% (2004:
1,250,345 units). More than 50,000 BMW 3 Series cars were manufactured
at the new Leipzig plant between March 2005, when series production
began, and the end of the year. In total, 1,122.308 BMW brand cars
were manufactured worldwide in 2005, an increase of 5.9% (2004:
1,059,978 cars). In addition, 200,119 MINI brand cars left the Oxford
plant, an increase of 5.6% (2004: 189,492 cars). Furthermore, 692
Rolls-Royce Phantoms were manufactured by Rolls-Royce Motor Cars in
Goodwood, England, 20.9% fewer than in the previous year (2004: 875).
Sales network expanded The BMW Group further expanded its
international sales network in 2005 and is now represented in 34
countries with its own sales companies. Approximately 100 countries are
handled by local importers. Following the opening of the new sales
company in Portugal at the beginning of 2005, the BMW Group is now
represented with its own sales companies in all Western European EU
countries. With the establishment of a new sales company in China, the
BMW Group assumed direct responsibility also for imports as of October.
The joint venture company, Brilliance China Automotive Holdings Ltd.,
continues to be responsible for local production of BMW 3 and 5 Series
cars and retail of those cars on the Chinese market. The BMW Group also
made preparations in 2005 to enter the Indian market. The sales
company, based in the Delhi region, and the assembly plant in Chennai,
will commence operations at the beginning of 2007. At present, the
dealer organisation for the BMW brand comprises more than 3,000
locations around the world. By the end of 2005, the number of locations
serving the MINI brand had increased to over 1,400, which means that
the MINI brand is now present in 80 countries. As in the previous year,
Rolls-Royce motorcars are sold worldwide by approximately 70 dealers in
23 countries. Workforce remains constant At the end of 2005, the BMW
Group had a worldwide workforce of 105,798 associates, similar to the
high level one year earlier (31 December 2004: 105,972 employees). More
than three quarters of the workforce are employed in Germany. The
number of apprenticeship positions, at 4,464, remained unchanged
compared to the end of the previous year. * * * The complete Annual
Report for 2005 is available for download at www.bmwgroup.com. For
questions please contact: Corporate Communications Mathias Schmidt,
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 Internet:
www.press.bmwgroup.com e-mail: presse@bmwgroup.com