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GERMANY: Volkswagen results hit by restructuring – but deliveries up

By just-auto.com editorial team | 27 October 2006

Volkswagen has announced a 92% fall in third quarter net profit, attributed to severance costs and a pensions deal associated with its restructuring. Net profit in the July-September period was EUR23m euros, down from EUR282m a year ago.

Figures for the year to the end of September are better, with net profit up 77% to EUR1.209bn.

Volkswagen group sales have been recovering this year. In the third quarter unit sales were up 7.1% to 1.4m vehicles, while sales revenues were up the same percentage to EUR25bn. The performance in the third quarter was slightly down on the result for the nine months as a whole, which sees deliveries to customers up 10.3% to 4.3m vehicles, and sales revenues up 11.8% to EUR77bn.

Group operating profit before special items increased by 62% to EUR3bn in the first nine months.

VW CEO Hans Dieter Pötsch said: "Although we have made significant progress in improving our competitiveness, we are still not satisfied with what we have achieved. We still have a long way to go to achieve our medium-term group targets."

The Volkswagen brand group (which includes Skoda, Bugatti and Bentley) generated an operating profit before special items of EUR1.1bn between January and September 2006, up by just under a billion euros year on year. Deliveries to customers rose 11.4% to 2.9m vehicles. "We have made good progress in restructuring our core Volkswagen passenger cars brand", said Pötsch, "but we still have some way to go. We need to further improve our cost situation so that our new models are successful and we can grow, even in highly competitive markets."

The Audi brand group (which includes figures for SEAT and Lamborghini) recorded a 21% increase in operating profit to EUR1.2bn. Deliveries rose by 6.9% to 1m vehicles.

In a statement Volkswagen said that SEAT's earnings performance remained unsatisfactory, and that Skoda results were developing, without giving any further detail.

The commercial Vehicles business line generated an operating profit of EUR41m, a year-on-year increase of EUR40m. Volkswagen commercial Vehicles delivered 319,000 vehicles, corresponding to growth of 10.8%.

The financial services division again made a significant contribution to group's earnings. Its operating profit again reached a high level, EUR729m.

Special items and the sale of Europcar affected earnings for the first nine months. The gains on the sale of Gedas and Volkswagen Bordnetze made a positive contribution totaling EUR0.3bn.

Pötsch emphasized that 2006 was the year of restructuring. "We are scrutinising all areas and processes. This is the year in which we set the course for the future and the long-term success of our company. Our goal is clear: We want to generate profit before tax of EUR5.1bn in 2008."