Audi grapples with stagnant profit due to Europe slump
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INGOLSTADT, Germany -- Audi aims for a "slight" increase in revenue this year after Europe's slumping market hit the brand's 2012 earnings.
Audi's operating profit rose 0.6 percent to 5.38 billion euros ($6.99 billion) in 2012 while net profit fell 2 percent to 4.35 billion euros, the automaker said today.
Revenue improved 11 percent to 48.8 billion euros. Operating profit as a percentage of sales was 11 percent, slightly above its long-term target range of between 8 percent and 10 percent. The company said it expected to reach an operating margin at the upper end of its long-term target in 2013.
Audi forecasts higher deliveries this year on demand for the next-generation A3 Sportback introduced last month and the S3 performance version of the model coming out this summer. A sedan version of the A3, which the automaker is targeting at American and Chinese buyers, is set to reach showrooms later this year.
Audi is Volkswagen Group's main profit driver, contributing about 40 percent to VW Group earnings.
Audi stood by a goal to beat last year's record 1.46 million vehicle sales in 2013 and increase deliveries to more than 2 million by 2020. The brand aims to snatch the luxury-sales crown from rival BMW in 2020.
Audi CEO Rupert Stadler refrained from giving a concrete profit forecast at Audi's annual news conference today at the brand's headquarters in Ingolstadt, Germany, merely saying that 2013 "will be at least as challenging" as last year.
"We will grow further in 2013," Stadler said, adding that Audi expected to reach 1.5 million annual unit sales earlier than planned. Audi initially wanted to reach that mark in 2015.
Audi is grappling with the impact of slumping auto demand in core European markets. "Overall development in western Europe was recessive and economic output contracted," Chief Financial Officer Axel Strotbek said.
Audi said it shouldered 1 billion euros in additional sales costs last year, indicating greater efforts by the luxury manufacturer to use discounts when launching models such as the new A3 compact and the A8 hybrid sedan.
"The outlook appears rather conservative," Commerzbank analyst Sascha Gommel said of Audi's forecast. "But considering the weak European market a cautious outlook is hardly a surprise."
The situation in Europe, destination of half of Audi's global sales, implies very many risks, said Hamburg-based M.M. Warburg analyst Marc-Rene Tonn. "A certain amount of restraint and caution is perfectly conceivable."
Investment plan
Audi will invest about 11 billion euros by 2015 to expand its global production network and widen its model lineup in its effort to surpass BMW. To push growth, Audi is expanding its plant in Gyoer, Hungary, and will open a new factory in Foshan, China, later this year. The automaker will start construction in May of a new plant in Mexico, where it plans to build the Q5 SUV beginning in 2016. Local production in Mexico will reduce Audi's exposure to swings between the euro and the dollar.
"We initiated the largest investment program in our history," Strotbek said today of the expansion plans.
BMW, the world's biggest luxury carmaker in terms of full-year sales volume, regained the top spot in luxury auto sales from Audi last month on rising sales of the 3 series and the X1 SUV, while the Mercedes-Benz brand fell further behind its German rivals. Both Audi and Mercedes are seeking to topple BMW as the market leader by the end of the decade.
The three luxury carmakers posted fresh sales records last year and expect demand to rise further in 2013 as growth in markets such as China and North America is anticipated to more than offset shrinking demand in Europe.
Bloomberg and Reuters contributed to this report
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