Volkswagen AG reportedly said it expects a weak first quarter but higher 2005 operating earnings as it pins its hopes on the success of a restructuring programme and rejuvenated model line.
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”Operating profit after special items will improve year-on-year in 2005, although the extent of this improvement depends on external factors that cannot be predicted at present,” Europe’s largest carmaker told Reuters on Tuesday, adding that first-quarter operating profit, as in the previous year, ”will not be satisfactory”.
Michael Raab, analyst at Sal Oppenheim, told the news agency: ”The wording they have used is almost tantamount to a profit warning for Q1 and there were obviously a couple [of] people out there who were playing Volkswagen as a restructuring story.”
Reuters said first quarter operating profit fell 46% to €329 million ($US434.8 million) in 2004, but the figure could be restated due to a change in accounting rules.
Chief executive Bernd Pischetsrieder reportedly told a news conference he was confident that the group would reach its ForMotion 2005 savings target of €3.1 billion.
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By GlobalData”In the face of growing price pressure, continuing unfavourable exchange rates and uncertainty about developments in the costs of raw materials, especially steel, the competitive situation in our industry will be further exacerbated,” he said, according to Reuters.
The report said deliveries to customers declined 0.5% to roughly 687,000 vehicles in the first two months of the year, dragged down by a drop in China, VW’s most important foreign market.
The company reportedly said it expects an improvement in sales later in the year thanks in part to this month’s launch of its popular Jetta [Bora] compact saloon in the United States and Passat mid-sized saloon in Europe.
Reuters noted that investor hopes for a turnaround have also been boosted by the arrival of former Chrysler manager Wolfgang Bernhard, who, Pischetsrieder said, will take over responsibility for the VW brand group ”long before” January 2006.
Reuters said this cannot come too soon, since the division swung to a 2004 operating loss of €44 million from a €486 million profit in 2003.
The news agency noted that, early in January, VW chief financial officer Hans Dieter Poetsch had forecast an improved operating profit for 2005 and a clear rise the following year, when he said earnings should improve by a few billion euros.
”We believe that the situation will remain difficult in the key automobile markets, such as Germany, China and the USA,” Pischetsrieder reportedly said.
Pro rata operating profit at its China joint ventures declined by 60% to just €222 million euros last year, while the group’s North American operating loss widened to €907 million from €168 million in 2003, Reuters said.
”We are working intensively to reorient the Volkswagen group in China, to maintain our market leadership and to profit more clearly from the growing demand in China,” the VW CEO reportedly said.
