Audi limits decline in quarterly profit at VW

Comment on this story
br audi Bloomberg An employee places a logo on an Audi A1 vehicle on the production line at the Audi factory in Vorst, Belgium. Audi has been closing the gap on BMW for the lead in luxury car sales, and helping to shore up profitability at parent Volkswagen. Photo: Bloomberg

Christoph Rauwald Frankfurt

VOLKSWAGEN (VW) reported second-quarter profit yesterday in line with analysts’ forecasts as growth at the Audi luxury division helped offset a decline at its namesake brand.

Earnings before interest and tax slipped 3.1 percent to e3.33 billion (R48bn) in the three months to June from a year earlier, Europe’s largest car manufacturer said.

The figure was slightly higher than the e3.31bn average of 13 analyst estimates.

“The results show quite remarkable resilience if you consider the economic environment,” Roman Mathyssek, a Munich-based analyst at Strategy Engineers consulting company, said.

After years of emphasising sales growth to pursue its goal of surpassing Toyota Motor as the biggest car maker, VW is shifting focus to profitability.

At the Volkswagen passenger car brand, the group’s biggest unit, the company plans to cut costs and boost productivity by e5bn by 2017.

“In light of the continued strong competitive pressures, the tense situation in some emerging economies and the fundamental technical and economic changes happening in our industry, we are working hard to create all the conditions we need today to ensure success tomorrow,” chief executive Martin Winterkorn said.

VW shares advanced as much as 2 percent and were up 1.4 percent at e178.20 at 12.27pm in Frankfurt trading. The stock has fallen 13 percent this year, valuing the company at e84.5bn.

VW stuck to its forecast that operating profit would amount to between 5.5 percent and 6.5 percent of sales, which may rise or fall by 3 percent. The car maker’s margin narrowed to 6.5 percent in the quarter from 6.6 percent a year ago, as Audi and Czech unit Skoda helped shore up profitability.

The VW brand’s second-quarter earnings before interest and tax tumbled 37 percent to e572m.

The car maker is spending on overhauling the European edition of the Passat mid-sized sedan. VW also plans to invest $900 million (R9.6bn) to build a new seven-seat sport utility vehicle in Tennessee to revive flagging US sales. The unit’s profit margin was 2.3 percent, compared with a medium-term target of 6 percent.

In addition to lowering purchasing expenses at the VW brand, the world’s second-largest car maker is mobilising a team of 40 to 60 top managers to accelerate vehicle and technology development to mimic the fast-paced roll-outs of consumer electronics companies like Apple.

Robust sales growth in China and rising demand for Audi vehicles are keeping VW on track to exceed 10 million annual deliveries worldwide for the first time this year, four years earlier than initially anticipated. It plans to introduce 100 new or revamped vehicles through next year to put pressure on Toyota, which held a slim lead in the first half.

Audi, the second-largest luxury car brand, has been closing the gap to BMW’s namesake marque on the back of new cars like the A3 sedan.

Operating profit at the unit increased 1.5 percent to e1.36bn in the second quarter. – Bloomberg


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.