Volkswagen Group maintains profitable growth trajectory

The Volkswagen Group maintained its profitable growth trajectory in the first half of 2011, extending its leading position in the global market. “Our unique brand diversity and highly attractive products, our leading position in the field of environmentally-friendly technologies, our financial strength and our constantly growing presence in all key areas of the world are key competitive advantages for the Volkswagen Group”, said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft, on Thursday at the presentation of the financial report for the first six months of the year.

At 4.1 million (H1 2010: 3.6 million), vehicle deliveries by Europe’s largest automotive group were up 14.3 percent, topping the strong figures for the previous year. Global market share rose from 11.7 percent in the first half of 2010 to 12.4 percent. Sales revenue in the first six months of the current year was up 25.8 percent on the prior-year period, to €77.8 billion (€61.8 billion). Operating profit more than doubled, climbing from €2.8 billion to €6.1 billion. The operating return on sales rose from 4.6 percent to 7.8 percent year-on-year. The consolidated operating profit does not include the Group’s €1.2 billion share of the operating profit from the Chinese joint ventures (€0.8 billion). These companies are included using the equity method and are therefore reflected in the financial result. The measurement as of the reporting date of the put/call options on Porsche Zwischenholding GmbH had a positive effect on the financial result. Profit before tax for the first half of the year amounted to €8.2 billion (€2.6 billion). The figure after tax increased to €6.5 billion (€1.8 billion).

CFO Hans Dieter Pötsch was also satisfied with business developments. “We have recorded a further increase in profitability”, he said. The Volkswagen Group is benefiting from dynamic growth in almost all regions of the world. In addition to higher unit sales, amongst others, lower product costs contributed to the increase in profitability. “In view of the global economic challenges, we are well advised to maintain our cost and investment discipline and to further improve our financial strength”, Pötsch continued.

Net liquidity in the Automotive Division was up €0.8 billion in the first half of 2011 as against year-end 2010, to €19.4 billion. The Volkswagen Group invested a total of €6.5 billion (€4.5 billion) in the Automotive Division in the period from January to June. This figure already includes the cash outflows in the first half of the year for the acquisition of the trading business of Porsche Holding Salzburg, the increase in the investment in MAN SE, the Munich-based commercial vehicles and diesel engine manufacturer, to 30.47 percent of the voting rights, and the investment in SGL Carbon SE which all together totals €3.3 billion. “Our continuing high liquidity is proof of the Volkswagen Group’s financial strength and stability”, said Pötsch. “At the same time, it gives us the financial flexibility we need for our investments and to implement our Strategy 2018.”

The Volkswagen Group maintained its strict investment discipline in the first half of the year with a ratio of investment in property, plant and equipment to sales revenue of 3.7 percent (3.5 percent) in the Automotive Division. This figure is expected to remain within the target corridor of up to around 6 percent of sales revenue for the full year. The strong growth in sales revenue meant that the ratio was only slightly higher than in the previous year, despite increased capital expenditure.

The sales situation at all of the Group’s volume brands and business fields improved in the first six months of the year. Total unit sales rose by 15.9 percent compared with the prior-year period, to 4.1 million vehicles (3.6 million).

The Volkswagen Passenger Cars brand sold 2.2 million vehicles (1.9 million). This corresponds to an increase of 13.7 percent compared with the prior-year period. Operating profit climbed to €2.1 billion (€1.0 billion). Demand for the Polo, Tiguan, Touareg, Jetta, Passat Variant and Sharan models was particularly strong.

Audi’s unit sales improved by 15.3 percent year-on-year to 762,000 vehicles (660,000). Operating profit climbed €1.2 billion to €2.5 billion. The Audi Q5 and Audi Q7 models were particularly popular. The new Audi A1, Audi A7 Sportback and Audi A8 models were also a hit with customers.Czech subsidiary Skoda lifted sales by 21.3 percent to 362,000 vehicles (298,000). Operating profit rose to €412 million (€227 million), a rise of 81.5 percent.

SEAT increased unit sales by 1.0 percent in the period between January and June despite a slump in demand in the Spanish passenger cars market, for a total of 188,000 vehicles (186,000). The brand’s operating loss narrowed to €48 million compared with the prior-year figure of €157 million.The luxury cars segment continued to rebound in the first six months of the year. In line with this, sales by Bentley rose by 42.2 percent to approximately 3,000 vehicles. At EUR 17 million, the brand’s operating loss was substantially smaller than in the first half of 2010 (€109 million).

Volkswagen Commercial Vehicles benefited from a clear increase in demand in the first half of the year. Unit sales rose by 36.9 percent to 218,000 vehicles (159,000). Operating profit almost doubled to €235 million (€118 million).

Swedish truck manufacturer Scania reported a clear rise in sales in Europe, the Asia/Pacific regions and the Middle East – overall unit sales climbed 42.3 percent to approximately 40,000 vehicles, while operating profit climbed to €743 million (€577 million). This corresponds to an increase of 28.8 percent compared with the prior-year period.Volkswagen Financial Services lifted its operating profit by €191 million year-on-year to €553 million in the reporting period.

The Volkswagen Group is expecting global demand for passenger cars in full-year 2011 to outstrip the figure for the previous year. As a result, the Board of Management has confirmed its target of again increasing in deliveries in the current year. “The ongoing strong demand in strategically important markets is providing a tailwind, while our large number of new models is giving us an additional boost”, said Winterkorn. However, he then added: “The coming months will be challenging for us and will require us to work hard to maintain this high level”.

The strained debt situation in certain eurozone countries and the end of subsidy programs will have a negative impact on demand for new vehicles in many Western European countries. In Central and Eastern Europe, Volkswagen is forecasting a rise in vehicle sales. The positive trends in the Chinese and Indian markets will continue, and the Group also expects new vehicle registrations in North and South America to rise.

A confident Winterkorn said that “Volkswagen is robust enough to remain in the fast lane”, adding: “Our expertise in technology and design allows us to provide a diverse, attractive and environmentally friendly range of products to meet our customers’ desires and needs”. He also said that the modular toolkit system, which is continually being optimized, will have an increasingly positive effect on the Group’s cost structure. However, the continuing volatility in interest and exchange rate trends and commodities prices will weaken the positive volume effect. Nevertheless, the Board of Management expects the Volkswagen Group’s 2011 sales revenue and operating profit to be significantly higher than the previous year.