Luca De Meo is raising expectations: "The Ateca is just the beginning of the most ambitious product offensive in the history of SEAT."

Luca De Meo is raising expectations: "The Ateca is just the beginning of the most ambitious product offensive in the history of SEAT."

VW Group brand SEAT says it closed 2015 with a profit after-tax of EUR6m, which compares with an EUR66m loss in 2014. It's the first profit for the Spain-based brand since 2008.

Growth in sales and a product mix with a higher contribution margin were the two main driving forces behind the change. SEAT posted a turnover of 8.3 billion euros, 11% more than the previous year. This was the company's best ever result and double the revenue in 2009. Average earnings per vehicle increased by 3.5%.

"SEAT's progress in 2015 was twofold – not only did we obtain a positive result for the first time since 2008, but we achieved it during a year of major challenges. We are implementing the right strategy that enables us to face the challenge of sustaining long-term profitability with optimism. We have a brilliant future ahead of us thanks to the launch of new products and the integration of new technologies in both the field of mobility as well as connectivity," said Luca de Meo, President of the SEAT Executive Committee, during the presentation of the 2015 annual results.

The growth in sales for the third year in a row, exceeding the 400,000 vehicle barrier in a single year, was the result of recovery in southern European markets such as Spain and Italy, the fifth consecutive year of growth in Germany, SEAT's main market, and the brand's success in Mexico.

SEAT said the sustained level of sales of the Leon and the Ibiza, with 2015 deliveries totalling 160,900 (+4.4%) and 153,600 (+2.4%) units respectively, the strong increase of the Alhambra (+17.2%) and the success of the Audi Q3 (made at Martorell) were beneficial to the volume as well as to SEAT's revenue, which grew for the sixth year in a row.

SEAT said it has increased investments and R&D expenditure for the launch of new models, such as the work done to adapt Line 1 at the Martorell factory to the new MQB A0 platform. In 2015 SEAT spent EUR586m on investments and R&D, 28% more than the previous year.

The company improved its EBIDTA (earnings before interest, taxes, depreciation and amortisation) by 30%, reaching EUR391m, and increased operating cash flow by almost 50% to EUR781m. The company's Vice-President for Finance, IT and Organisation Holger Kintscher said: "SEAT continues to improve its capacity to generate its own resources to self-finance investments and consolidate the company from a financial standpoint. After several years of improvement, last year was a true milestone on the road to sustainable profitability".

The increase in sales and production enabled the creation of 350 new jobs in the entire SEAT Group, including 100 engineers at the Technical Centre, which celebrated its 40th anniversary last year.

Further volume growth and an SUV projected for 2016

SEAT expects further growth in 2016. Highlights for this year include the launch of the Ateca, the brand's first SUV, which was recently presented at the Geneva Motor Show. The new model is a car that has been entirely created at the SEAT Technical Centre and will be commercially available this summer.

The brand says it is going to intensify its commitment to the SUV segment and in 2017 will add a new model with the launch of a smaller all-road crossover to be developed and manufactured in Martorell.

"This is excellent news for both the brand and our main factory because it is the fastest growing segment and symbolises a major step forward in making it the third pillar of the company, alongside the Ibiza and Leon families," said Luca de Meo.

COMMENT

SEAT's positive results come after a relentlessly downbeat period for the brand. Within the VW Group, it has been the perennial weak performer viewed on metrics such as operating profit. Skoda has enjoyed much more success as a 'value driven' brand and has successfully expanded in international markets while SEAT has struggled to develop a consistent and differentiated set of brand values understood by car buyers. While the SEAT brand managed 400,000 units in 2015, Skoda was over a million.

However, a return to profitability for SEAT will be very welcome at under pressure VW Group, even if it mainly reflects recovery in major markets, especially Spain. The real test comes as the new SEAT models – especially SUVs – roll out over the next few years. The risk is that the small SUV/crossover segments are now becoming over-populated with product and that SEAT could struggle as a late newcomer. Aggressive pricing to gain rapid market presence may be difficult to resist and that could detract from profitability. The products, needless to say, will have to be very good.