Despite the ongoing difficult macroeconomic environment, the Volkswagen Group generated a clearly positive operating profit of €1.5 billion in the first nine months (January – September 2008: €4.9 billion). This figure does not include the profit attributable to Volkswagen of more than €500 million recorded by the Chinese joint ventures in China, the Group’s largest sales market.
The Group has further extended its sound financial base: as of September, the Automotive Division’s net cash flow improved substantially to €5.1 billion (€–0.1 billion). Net liquidity in the Automotive Division also increased again: at €13.4 billion as of September 30, it was €5.4 billion higher than at the end of the last fiscal year.
Winterkorn: “Volkswagen is holding its own extremely well”
“The Volkswagen Group is holding its own extremely well despite the adverse conditions. While the global market is contracting by 12 percent, we are recording stable delivery levels. This proves that – even in difficult times – we are well positioned with our multibrand strategy,” said Prof. Dr. Martin Winterkorn, Chairman of Volkswagen Aktiengesellschaft’s Board of Management, on Thursday at the presentation of the interim report on the first nine months.
“We have again proved that we are maintaining our financial flexibility during the crisis, too,” added CFO Hans Dieter Pötsch. “We will continue to exploit our opportunities on the market, while maintaining strict cost discipline and ensuring our liquidity,” he continued.
The Volkswagen Group’s earnings were impacted by the global financial and economic crisis in the first nine months. While deliveries remained at the prior-year level (4.8 million units), production declined by approximately 12 percent year-on-year to 4.4 million vehicles. With this move, Volkswagen has reduced inventories significantly. Sales revenue decreased by 9.7 percent to €77.2 billion due to volume-related factors. Profit before tax amounted to €1.1 billion (€5.3 billion), while profit after tax was €655 million (€3.7 billion).
No cuts in capital expenditure on new models and locations
At the same time, Winterkorn underlined that low-emission mobility is the Volkswagen Group’s top priority: “Innovative and environmentally friendly vehicles are the guarantee for our success. We will therefore continue to invest in developing forward-looking technologies and in expanding our model range,” he said.
For example, investments in property, plant and equipment at the Automotive Division increased by 2 percent in the first nine months to €3.9 billion (€3.8 billion). They primarily related to new production facilities, models to be launched in 2009 and 2010 and the ecological focus of the Group’s model range. The ratio of investments in property, plant and equipment to sales revenue (capex) rose to 5.7 percent (4.9 percent) due to the decline in the sales revenue.
Brands and business fields
Almost all automotive markets have recorded a downturn – which has been substantial in some cases – in the year to date. The performance of the individual brands and business fields was again hit hard by the global financial and economic crisis. However, the Volkswagen Group strengthened its global market position and increased its share of the global passenger car market to 11.7 percent (10.0 percent).
In the first nine months, the Volkswagen Passenger Cars brand recorded a lower operating profit of €335 million (€1.9 billion) due to a 10 percent decline in unit sales to 2.5 million vehicles and mix deteriorations.
The Audi premium brand generated an operating profit of €1.2 billion (€2.1 billion) following a 12 percent drop in unit sales. This again proved that the brand has no difficulty competing in the tough environment. The figures for the Lamborghini brand included in the key figures for Audi also did not match the prior-year level on account of the weak market.
At the Škoda brand, an almost 19 percent fall in unit sales and continuing unfavorable exchange rate conditions cut operating profit to €162 million (€455 million).
SEAT recorded a 19 percent decline in unit sales and an operating loss of €228 million (operating loss of €30 million) because of the ongoing negative situation on the Spanish passenger car market.
At the Bentley brand, the heavy slump in sales volumes in the luxury segment resulted in an operating loss of €148 million (operating profit of €82 million).
Volkswagen Commercial Vehicles generated an operating profit of €390 million (€283 million), including the gain on the sale of the Brazilian heavy truck business.
In a difficult market environment, Scania achieved an operating profit of €98 million (€227 million).
Volkswagen Financial Services again made a significant contribution to the Volkswagen Group’s profit, recording an operating profit of €468 million (€744 million).
Volkswagen’s goal is to further improve its competitive position
The global economic environment will remain difficult in light of the continuing financial and economic crisis. Global economic growth in 2009 will be negative. Of the world’s major economies, only China and India are likely to record positive growth. The world’s automotive markets will be especially affected by this development and will decline substantially compared with the previous year.
Although the Volkswagen Group will again be unable to escape this downward trend in the rest of the year, it will continue to outperform the market as a whole and further increase its market share. “At the same time, the trend in the automotive industry means that there is no reason for premature optimism. The business climate remains tough,” said Winterkorn.
The Volkswagen Group’s sales revenue will be below that of the previous year, primarily due to the weaker unit sales situation. Rising refinancing costs and mix deteriorations will serve as an additional drag on earnings.
Given this situation, Volkswagen continues to expect that it will be unable to reach the level of earnings it achieved in previous years, although that the Group will close 2009 with a profit.