Volkswagen has reported a robust second-quarter operating profit that beat even the most bullish expectations on Friday and reaffirmed that pretax and operating profits after special items would grow this year, Reuters said.
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Due to a turnaround at both its flagship VW brand group and commercial vehicles, operating profit at Europe’s largest carmaker rose 75% to €911 million ($1.10 billion), beating the average forecast of €685 million given in a Reuters poll of analysts as well as the range of €536 million to €814 million.
“It seems that they have made a lot of effort to present a strong set of figures today,” Sal. Oppenheim analyst Patrick Juchemich told Reuters, calling the operating profit “a positive surprise”.
A complete collapse in earnings from its two key Chinese joint ventures led to a 7.4% decline in pretax profit to €551 million but that result was in line with analysts’ expectations, the report said.
In its results statement Volkswagen said that it would restructure its business in China but gave no details.
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By GlobalDataHowever, VW said the overall market outlook remained unfavourable despite an improvement in exchange rates, Reuters noted. Moves in exchange rates adversely affected the first-half operating profit of €1.38 billion euros by €300 million, the company reportedly said.
“In addition, we expect that competitive pressures will tend to increase and that the cost of raw materials – especially steel and plastics – will remain at high levels,” it said.
Nevertheless, the Wolfsburg-based company stuck to its 2005 profit targets, saying it was confident it could reach its planned “ForMotion” gross earnings improvement of €3.1 billion this year, after attaining €1.7 billion in the first half.
Reuters said operating profit at VW’s core automotive division nearly trebled to €637 million in the second quarter, lifting its operating margin to 2.8% versus just 1.1% a year ago. Free cash flow at automotive doubled to €1.23 billion.
The division benefited primarily from a steep rise in VW brand group operating profit to €222 million versus €104 million in the second quarter of 2004.
Commercial vehicles swung to an operating profit of €49 million from a loss of €46 million last year.
Its money-spinning Audi brand group improved operating profits by 17% to €354 million, Reuters said.
On a regional level, North America remained weak but managed to keep operating losses stable in the quarter at €268 million. China was the major headache for Volkswagen though. On a pro-rata basis, the two Chinese ventures swung to a €6 million operating loss from a profit of €145 million a year ago.
Reuters said chief executive Bernd Pischetsrieder has targeted a €4 billion net improvement in group pretax profit by 2008, driven by a €7 billion gross increase at its ailing VW brand alone.
