Friday, April 28, 2006

Volkswagen AG with Clear Growth in Deliveries, Sales, and Profits

Text from Volkswagen AG.
Wolfsburg, 28 April 2006 - Volkswagen AG reported clear growth in deliveries, sales and profit in the first quarter of 2006 compared with the prior-year period. Deliveries to customers rose by 15.1 percent compared with the first quarter of 2005 to 1.361 million vehicles. Sales revenue grew 21.4 percent to €25.3 billion. Operating profit before special items increased 55.1 percent to €726 million. “This performance is a further step in the right direction for the Group,” commented the Volkswagen AG Member of the board of Management, Finance, Hans Dieter Pötsch, on Friday. “At first sight, double-digit growth in deliveries to customers is encouraging. But this will not continue during the remainder of the year as it is based on weak first quarter figures for 2005.”

In the first quarter of this year, the Volkswagen brand group reported a positive operating profit of €134 million, €187 million higher than the negative figure for the previous year. Deliveries to customers ran at 927,000 vehicles, an increase of 16.1 percent over the prior-year period. Key factors were full availability of the Passat, Jetta and Golf Plus and sales successes at Skoda in the first quarter of 2006.

Development of the Audi brand group remained very positive. At €318 million, operating profit in the first quarter of 2006 was 5 percent up on the prior-year period, primarily as a result of a pronounced rise in deliveries to Audi brand group customers. This figure rose by 13.4 percent to 334,000 vehicles. Brand group operating Profit was affected by the continuing unsatisfactory earnings situation at SEAT.

The Commercial Vehicles business line reported an operating profit of €36 million, an improvement of €75 million over the prior-year period. Volkswagen Commercial Vehicles delivered 99,000 vehicles to customers, representing an increase of 11.4 percent.

The Financial Services Division generated an operating profit of €237 million, slightly up on the prior-year period, and again made a significant contribution to group profit.

According to Pötsch, the increase in sales volume was driven by the large number of new models. “Revenue per vehicle has risen, while at the same time sales and marketing costs per vehicle have fallen. That clearly shows we have not bought our stronger position in the markets but have focussed our investment on sales concepts and finely-tuned financial services throughout the automotive value chain.”

Pötsch emphasized that key automobile markets had started the year with a positive underlying trend, but that general economic conditions continued to present not inconsiderable risks for automotive demand. According to Pötsch: “We expect our market position in the USA will continue to recover with the new models. In Western Europe, our deliveries to customers will also be up on the previous year’s level as all brands are offering new volume models. In China, South America and South Africa, we are also assuming a moderate increase in volumes. Overall, then, we expect slight growth in worldwide deliveries to customers in 2006.”

Pötsch reaffirmed that 2006 operating profit before special items would improve over the previous year. Furthermore, the Automotive Division was expected to report a positive net cash flow and a further improvement in net liquidity in 2006.

Looking at the continuing unsatisfactory return on investment, Pötsch commented: “These quarterly results show that the measures we are implementing under our cost-cutting and performance enhancement programs are taking effect. But the return on investment is still well below target. We must continue to work hard at restructuring, particularly regarding the core Volkswagen brand.”

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