BMW will book a one-off, non-cash gain of EUR300m euros ($356.8m) in the first quarter of 2006 by selling shares in aircraft engine maker Rolls-Royce, the automaker said on Friday.
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Citing a BMW statement, Reuters said the move would eventually reduce BMW’s shareholding in Rolls-Royce to around 3.25% from 9.02%.
The news agency noted that, in December 2003, BMW raised EUR561m by issuing a five-year bond with an annual coupon of 1.875%, exchangeable into Rolls-Royce shares.
“Once the shares reached a certain level, then investors could either receive cash or stock in Rolls-Royce,” a BMW spokesman told Reuters.
The report noted that BMW’s forecast to keep pretax profit “roughly stable” in 2005 became continually more difficult to achieve due to the rise in the stock of the aircraft-engine manufacturer, despite this having no impact on BMW’s operating business, and the carmaker said eventually 2005 earnings before tax could drop up to 10%, as it posted a fair-value loss of EUR231m in the first nine months alone due to accounting regulations on valuing financial assets.
Reuters noted that analysts have criticised the IFRS regulations that make companies reflect changes in the value of financial instruments – such as the underlying loss in the call option – below the operating line.
