Volkswagen has reported record results for 2006. Sales revenue exceeded the EUR100bn mark for the first time and operating profit before special items rose 51.7% to EUR4.4bn.
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“We recorded an impressive result”, claimed chief financial officer Hans Dieter Pötsch. “The ForMotionplus performance enhancement programme helped the group to optimise its cost structures and processes and increase its competitiveness.”
Group sales revenue rose 11.6% in 2006 to around EUR105bn, while the cost of sales before special items rose only 10.5%, showing the effect of what one VW executive called “strict cost discipline”. This was achieved despite continued unfavorable exchange rates and higher energy and raw materials prices. Distribution and administrative expenses also rose at a slower pace than sales revenue. The operating margin before special items improved from 3.1% to 4.2%.
Last year VW implemented extensive measures to improve competitiveness and noted in its results announcement that restructuring expenses would deliver “a sustainable increase in the group’s earnings power”. Special items reflecting such expenses, and the income from the sale of Gedas and Volkswagen Bordnetze, reduced earnings by EUR2.4bn. Operating profit after special items was EUR2.0bn (previous year: EUR2.5bn) and the group netted a profit after tax of EUR2.8bn (EUR1.1 bn).
The Volkswagen brand group almost trebled its operating profit before special items in 2006, which rose from EUR516m to EUR1.4bn. Audi increased operating profit by just under half to around EUR2bn, despite the continued unsatisfactory result at Seat. Strong sales boosted commercial vehicles operating profit to EUR101m from EUR96m). Financial services operating profit was EUR843m vs EUR829m.
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By GlobalDataWorldwide vehicle deliveries rose 9.4% to 5.7m worldwide. Growth was particularly strong in China, up 24.3%, and South America/South Africa (up 14.9%).
VW mangement promised more equipment and technology in future vehicles and better customer service.
CEO Martin Winterkorn said the value of its brands was key to the group’s future. “That’s why we need strong, independent brands”, he said. Volkswagen dissolved brand groups at the beginning of this year and returned complete independence and responsibility for all aspects of each business to the brands.
Volkswagen also said that the reduction in CO2 emissions demanded by the EU is a core issue. The company’s goal, according to Winterkorn, is to accelerate the use of alternative fuels and to reduce fuel consumption overall. It will focus on developing second-generation biofuels and will offer hybrid vehicles.
VW will launch hybrid versions of the Audi Q7 and the Volkswagen Touareg in 2008, followed by a compact hybrid . Further economical, ‘environment-friendly’ models will be added to the ‘BlueMotion’ range.
Winterkorn said that the new model rollout would continue systematically this fiscal year. The company had had a good start to 2007, and had already sold 8.3% more vehicles year on year in the first two months.
“We are confident that we will be able to increase our deliveries to customers slightly in 2007, and exceed 2006 sales revenue. 2007 operating profit is expected to be higher than [a year ago] before special items.”
VW is expecting 2008 profit before tax of at least EUR5.1bn.
The automaker reiterated its medium-term target of an automotive division return on investment after tax of at least 9%. Eliminating special items produces a 2.9 percentage point increase to 5.8% for 2006.
