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Volkswagen first-half profit rises

Demand for Audi vehicles in China and the US insulated Europe’s biggest carmaker

  • Bloomberg
  • Published: 15:40 July 26, 2012
  • Gulf News

  • Image Credit: AFP
  • Photo credit Photo Caption lead in FILES - Photo taken on March 7, 2012 in Wolfsburg, central Germany, shows Volkswagen workers inspecting the auto maker’s VW Tiguan and Touran models coming off the assembly line. Volkswagen, Europe’s biggest car maker, said that net profits in the first half of the year soared by 36 percent, after selling 4.6 million cars worldwide. The group, which manufacturers 10 makes of vehicles, confirmed its annual outlook for the 2012 on the basis of the figures from the first six months of the year, which saw a 23-percent rise in turnover. AFP PHOTO / ODD ANDERSEN

Berlin: Volkswagen AG reported a 7 per cent gain in profit in the first half, as demand for Audi vehicles in China and the US insulated Europe’s biggest carmaker from the effects of the debt crisis in its home region.

Operating profit rose to a record 6.49 billion euros (Dh28.85 billion) from 6.09 billion euros a year earlier, the Wolfsburg, Germany-based company said today (Thursday) in a statement. The figure beat the 6.39 billion-euro average estimate of eight analysts surveyed by Bloomberg. Sales increased 23 percent to 95.4 billion euros.

Expansion in China and the US has diluted Volkswagen’s exposure to the European car market, which is poised to fall for the fifth consecutive year as the debt crisis saps buying power in the region. Demand for models that range from the VW Up! city car to the Lamborghini Aventador boosted sales 8.9 per cent to 4.45 million vehicles in the first half, lifted by the luxury Audi brand’s 12 per cent gain.

“Positive effects from our attractive model range and strong market position will be offset in part by increasingly stiff competition in a challenging market environment, especially in certain European countries,” Volkswagen said in the statement.

Volkswagen stuck to its target of matching last year’s record operating profit of 11.3 billion euros as higher revenue and auto deliveries offset increased development spending as it overhauls the Audi A3 compact and best-selling Golf. The average estimate for 2012 earnings before interest and taxes is 12.1 billion euros, based on a Bloomberg survey of 21 analysts.

Shares drop

Shares in the German manufacturer, which plans to become the world’s largest automaker by 2018, fell as much as 2.20 euros, or 1.7 per cent, to 131.45 euros and were down 1.4 per cent as of 9.49am in Frankfurt trading. The stock has climbed 13 per cent this year, valuing the company at 59.7 billion euros.

The performance is a stark contrast with PSA Peugeot Citroen, which is seeking to shut production in France as part of a plan to cut costs by 2.5 billion euros by 2015. Europe’s second-largest carmaker yesterday reported that its auto operations lost 662 million euros in the first half after deliveries slumped 13 per cent.

“The weakness of VW’s European competitors is the German carmaker’s strength,” Credit Suisse analyst Arndt Ellinghorst said ahead of the release. “This will support VW in the second half of the year when sluggish European demand will impact performance.”

Peugeot Tumbles

Other European automakers have felt the brunt of the local slump. Peugeot’s first-half sales in the region tumbled 14 per cent, while Fiat SpA’s and Renault SA’s deliveries each dropped 17 per cent, according to the ACEA auto industry group. VW’s European market share climbed to 24.1 per cent from 22.7 per cent as its sales slipped 0.8 per cent, beating the overall market’s 6.3 per cent decline.

Volkswagen may face a tougher second half as German car demand slows. The VDA industry association forecast that the market will slip to 3.1 million vehicles this year from 3.17 million in 2011. The softer demand has increased discounts in Germany, which reached a record level this month, according to Ferdinand Dudenhoeffer, director of the Centre for Automotive Research at the University of Duisburg-Essen.

VW expects little earnings contribution this year from MAN SE because of writedowns following the consolidation of the truckmaker in November, the company has said. VW, which is forging a trucking alliance between MAN, its Scania AB affiliate and its own commercial vehicle operations, raised its stake in the Munich-based company to more 75 per cent in June. MAN yesterday posted a 50 percent decline in second-quarter operating profit to 218 million euros.

The maker of the Golf hatchback continued its expansion by agreeing earlier this month to pay Porsche SE 4.46 billion euros for the rest of the sports-car brand that it didn’t already own, adding the iconic 911 to its lineup. Last week, the Audi unit completed the purchase of the Ducati motorcycle brand to expand its competition with BMW to two-wheelers.

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