FRANKFURT - Volkswagen cut its dividend by less than some had feared on Wednesday, helping its bruised shares even after a strong euro and weak demand for its cars almost halved profits in 2003.
Operating profit before special items at Europe's biggest carmaker fell 47.7 percent to 2.491 billion euros ($3.18 billion) last year, but were down 62.6 percent once VW had written off investments that have failed to pay off.
"It's a pretty mixed bag," said Commerzbank analyst Adam Collins. "It's reassuring that operating profit came in better than we had forecast, but special items were much higher than we expected."
VW said its operating profit took a hit of 711 million euros due to one-off special items such as the costs of developing upmarket cars that have been slow sellers.
"We have seen a huge depreciation on the Phaeton and the Bentley as well as VW's South American business," said one Frankfurt-based analyst.
Despite launching a new generation of its top-selling Golf cars at the end of August, VW said sales rose just 0.2 percent in 2003 to 87.153 billion euros.
VW did not update an outlook given late last year, which forecast that while 2004 should be a better year, it would be 2005 before business was back at full throttle.
Despite the lack of fresh guidance for 2004, Volkswagen shares rose following the results as market watchers said there was some relief that the company had not cut its annual payout to shareholders by more.
Volkswagen will propose a dividend for 2003 on its ordinary shares of 1.05 euros versus the 1.30 euros paid to investors in 2002, which is better than the 1.00 euro that many had been pricing in ahead of Wednesday's results.
But some analysts were critical, noting that the nearest VW came to a profit target for this year was to say that its medium-term earnings expectations were more positive.
Volkswagen, along with its European peers, is suffering from sluggish car demand and from the impact of a strong euro, which is denting the value of overseas sales.
French rival PSA Peugeot Citroen, which like VW, has been hurt by a dearth of new models and the cost of updating them, last week posted its first earnings drop in six years.
Unlike Peugeot, however, VW already has a new car on the road in the shape of the Golf V, but fears that it is not selling as well as hoped have made Volkswagen Germany's worst performing blue-chip stock so far this year.