Monday, October 30, 2006

Volkswagen Sells More Vehicles and Increases Profit

Source: Volkswagen AG.
Pötsch: New models successful – 2006 is the year of restructuring

WOLFSBURG, Germany - The Volkswagen Group reinforced its position in the global automotive markets and significantly improved its financial situation in the first nine months of the year.

Deliveries to customers rose by 10.3 percent to 4.3 million vehicles. Sales revenue grew by 11.8 percent to €77.0 billion. Operating profit before special items increased by 62.0 percent to €3.0 billion. “Our new models are being positively received by customers. We lifted our market share in all key countries despite the strong competitive pressure”, said Hans Dieter Pötsch, Volkswagen AG’s CFO, presenting the figures on Friday. “Although we have made significant progress in improving our competitiveness, we are still not satisfied with what we have achieved”, emphasized Pötsch. “We still have a long way to go to achieve our medium-term Group targets.”

Press release continues...

Volkswagen continues to face a difficult industry environment, with stiff competition, high energy and commodity prices, and unfavorable exchange rates. “Only strict cost discipline and the systematic continuation of our ForMotionplus performance enhancement program will enable us to secure the long-term profitability of our Group”, said Pötsch. “We have to make our Company strong and weatherproof if we want to prevail in the global competitive environment.”

The Volkswagen brand group generated an operating profit before special items of €1.1 billion between January and September 2006, up by just under €1 billion year-on-year. Deliveries to customers rose by 11.4 percent to 2.9 million vehicles. “We have made good progress in restructuring our core Volkswagen Passenger Cars brand”, said Pötsch, “but we still have some way to go. We need to further improve our cost situation so that our new models are successful and we can grow, even in highly competitive markets.” Skoda’s development continues to be encouraging.

The Audi brand group continued its positive business development in the third quarter. Its operating profit grew by 21.0 percent year-on-year in the first nine months to €1.2 billion. Deliveries rose by 6.9 percent to 1.0 million vehicles. SEAT’s earnings performance remained unsatisfactory.

The Commercial Vehicles business line generated an operating profit of €41 million, a year-on-year increase of €40 million. Volkswagen Commercial Vehicles delivered 319,000 vehicles, corresponding to growth of 10.8 percent.

The Financial Services Division again made a significant contribution to the Volkswagen Group’s earnings. Its operating profit again reached a high level, at €729 million.

Pötsch explained that the clear rise in unit sales was primarily attributable to the new models. “Our new model rollout is paying off. Despite difficult markets worldwide, we have succeeded in increasing sales revenue per vehicle. We will continue our sales strategy and supplement it with tailored financial services along the value chain.”

Special items and the sale of Europcar affected earnings for the first nine months. The special items in the first half of the year increased by €0.7 billion in the third quarter to a total of €2.0 billion, due to further restructuring expenses and a one-off payment into the company pension scheme agreed as part of the collective bargaining agreement. The gains on the sale of gedas AG and Volkswagen Bordnetze GmbH made a positive contribution totaling €0.3 billion. Consolidated operating profit after these special items was €1.4 billion (previous year: €1.9 billion). The after-tax gain on the sale of Europcar amounts to €0.8 billion, and is reported as profit from discontinued operations. Overall, the Group generated profit after tax of €1.2 billion (previous year: €685 million).

Pötsch emphasized that 2006 was the year of restructuring. “We are scrutinizing all areas and processes. This is the year in which we set the course for the future and the long-term success of our Company. Our goal is clear: We want to generate profit before tax of €5.1 billion in 2008.”

Pötsch reiterated the forecast for the current fiscal year of growth in worldwide deliveries to customers and a year-on-year improvement in operating profit before special items. Volkswagen expects the Automotive Division to record a positive net cash flow and an improvement in net liquidity compared with the end of 2005.

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