INGOLSTADT, Germany -- The Audi luxury unit of Europe's largest carmaker Volkswagen said on Tuesday it expected flat profits despite an anticipated rise in unit sales in 2003 after a slow start to the year.
"We should find ourselves at around the (profit) level of the previous two years," Audi finance chief Peter Abele said at the company's annual news conference.
Audi, which generated close to a third of parent group Volkswagen's profit last year, is expecting an eighth straight year of record sales in 2003, although its said the first two months of the year gave little grounds for optimism about the health of the car market as a whole.
Audi is launching an updated version of its small A3 hatchback later this year, one of its bread-and-butter models, and is also hoping that its revamped high-margin A8 executive saloon will help boost sales.
The company said pre-tax profit slipped around five percent to 1.25 billion euros ($1.35 billion) in 2002 as unfavourable exchange rates and high development costs before the product launches outweighed a slight rise in revenues.
Abele said the strength of the euro had lopped around 200 million euros off the company's profits last year, despite currency hedging, while investment spending, most of it going towards new models, rose 12 percent to 2.41 billion euros.
Georg Flandorfer, Audi board member responsible for sales, said sales so far this year were below the previous year's level, but noted that the company had just launched an updated A4 compact saloon a year ago and that potential customers could be holding back this year before the launch of the new A3.
He said he hoped the company would catch up with last year's performance by the middle of the year. The company aims to sell 750,000 Audi brand cars worldwide in 2003.
But Audi will face tough competition. Luxury carmaker BMW is also banking on an upturn in sales in the second half of the year after it launches revised versions of its 3-series and a new 5-series saloon.
Even Volkswagen could cannibalise some of the new A3's sales when it launches its new Golf, an identically sized hatchback, later in the year.
Deliveries of Audi-brand cars rose 2.2 percent to 742,128 units worldwide last year, although the company struggled in a weak German market, where deliveries fell 4.4 percent. Revenues rose 2.6 percent to 22.6 billion euros.
Continued cost cutting and a lower tax rate helped boost net profit, which rose 4.7 percent to a record 587 million euros.
"In very difficult economic circumstances Audi has proved again the potential of the marque. We will shift up a gear again," Chief Executive Martin Winterkorn said.