VW eyes flat 2013 profits as Europe crisis drags on
VW officials are banking on growth in China and the United States, along with gains in the luxury-car segment with the Audi brand, to help offset declining demand in Europe, where competitors are posting losses amid a recession.
(Bloomberg) -- Volkswagen AG, Europe's largest automaker, forecast that 2013 operating profit will match last year's level, falling short of analysts' estimates, as the shrinking auto market in its home region weighs on earnings.
VW is targeting earnings before interest and taxes this year on the same level as the 11.5 billion euros ($15.2 billion) earned in 2012, the company said today in a statement.
The average estimate of 14 analysts surveyed by Bloomberg is for 2013 profit of 14 billion euros.
"We expect that the Volkswagen group will outperform the market as a whole in a challenging environment," VW said in the statement. "However, we are not completely immune to the intense competition and the impact this has on business."
VW is counting on growth in China and the United States, along with gains in the luxury-car segment with the Audi brand, to help offset declining demand in Europe, where competitors are posting losses amid a recession.
Car registrations in the region last month were the least for a January since records began in 1990, following a drop to a 17-year low for all of 2012, according to the ACEA auto-industry association.
"For sure they are affected by the competitive environment in Europe, but this is not the case for other markets," said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt who has a buy rating on the shares. "I expected them to target an increase in operating profit this year. It doesn't sound very ambitious."
Volkswagen shares dropped as much as 12.45 euros to 163.60 euros and was down 6.1 percent as of 4:04 p.m. in Frankfurt trading. The stock has declined 4.1 percent this year, valuing the automaker at 74.5 billion euros.
The carmaker is revising wage policies for top executives that caps bonuses, which will now be based on VW earning a minimum operating profit of 5 billion euros, the company said in a separate statement.
The management board's total 2012 compensation will amount to about 56 million euros, a drop from 70 million euros for 2011, with CEO Martin Winterkorn earning 14.5 million euros, a 17 percent reduction.
Additional long-term incentive payments, which will depend on VW reaching targets for 2018, will be limited to 50 percent of the bonus, it said.
VW's forecast today is also scaled back from a year-old prediction made in the automaker's annual report for growth in 2013 in operating profit.
Revenue last year gained 21 percent to 193 billion euros as group worldwide deliveries, also including the Porsche, Skoda and Seat brands, jumped 11 percent to a record 9.07 million cars, sport-utility vehicles and vans.
Revenue will increase again this year, the automaker said. Sales were propelled by demand for a U.S. version of the Passat sedan, which VW began building in 2011 at a new plant in Chattanooga, Tenn., and for Audi's Q3 SUV, which was introduced in October 2011.
VW put a revamped model of its best-selling Golf hatchback on sale in September.
The company said in January that it's adding shifts at its main plant in Wolfsburg, Germany, to build more of the car for the European market, and it will expand its factory in Puebla, Mexico, to include production of the Golf's next version in 2014.
The manufacturer has a target of overtaking Toyota Motor Corp. and General Motors to become the world's biggest carmaker by 2018.
VW outlined an investment program for its automotive division in November totaling 50.2 billion euros through 2015, shortening the calendar from the usual five years because of unpredictability in the European car market.
Net income jumps
The spending includes 24.7 billion euros to develop new cars and trucks.
VW's Chinese joint ventures, which aren't consolidated, will invest another 9.8 billion euros in the period.
Net income last year jumped 41 percent to 21.7 billion euros, compared with the 22 billion-euro average analyst estimate. Profit was pushed up by revaluations of VW's options and stake in Porsche.
VW last year bought the 50.1 percent of the sports-car maker it didn't already own.
Cash flow from operating activities fell 5.1 percent to 16.2 billion euros, and net liquidity as of Dec. 31 was 38 percent lower than a year earlier at 10.6 billion euros, Volkswagen said.
The carmaker plans to increase the dividend to 3.56 euros a preferred share from 3.06 euros. The carmaker is scheduled to publish quarterly earnings, including figures by brand, on March 14.Contact Automotive News