FRANKFURT - Volkswagen AG posted stronger-than-expected second-quarter earnings on Tuesday but cut its profit outlook for the full year.
The automaker has been hit by shrinking markets in Europe, the United States and South America.
VW cut its full-year profit outlook at the same time it unveiled first-half results which beat expectations. The company said second-quarter pre-tax profits rose 13.5 percent compared with a year ago to 1.266 billion euros ($1.24 billion).
Volkswagen said it expected a pre-tax profit of "around four billion euros" for the full year, down from previous forecasts that it would match last year's record 4.4 billion euros.
Volkswagen said it had changed its outlook because signs of a pickup in the economies of western Europe and the United States had not materialized in the second half.
With first-half, pre-tax profit already at 2.263 billion euros, Chief Executive Bernd Pischetsrieder said the new forecast might appear conservative, but he expected the fourth quarter to be the market's worst over the next 18 months.
"Since the second half of the year will not be easier, I think we are on the safe side," he said.
Sales for the first half were down 3.2 percent at 44.060 billion euros, VW said.
TOUGH SECOND HALF
"If this is (a profit warning), we are not particularly worried because it is not severe," said analyst Xavier Gunner at UBS Warburg. "We knew that the second half of the year was always going to be difficult."
Pischetsrieder repeatedly had said the firm would match last year's record profit, but the company faces a challenging period as some of its best-selling cars, such as the Golf, begin to show their age.
Rivals such as PSA Peugeot Citroen have newer cars on the market in a segment hit by slowing sales.
Robert Buechelhofer, the board member responsible for sales and marketing, accused VW's competitors of grabbing market share with steep discounts on their list prices.
"Our incentive level is one third that of those who give the most, who are our French competitors," he told the conference call. "We are not buying market share at any price."
VW is to launch 12 new models by the end of 2003, including a new multi-purpose vehicle (MPV) -- a segment which it has to date let others dominate.
Pischetsrieder is seeking to re-align the company's brands -- which include SEAT, Skoda, Audi, Lamborghini and Bentley -- to stop them from competing against each other.
The new CEO must also contend with tough competition in shrinking markets. VW said its western European market share slipped to 18.2 percent from 18.9 in the first half.