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VW Quarterly Profit Beats Estimates on Porsche Deliveries

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An Audi AG S3 Vehicle Sits in Washington
VW said last month that it may sell more than 10 million vehicles for the first time in 2014, four years earlier than planned. Photographer: Andrew Harrer/Bloomberg

April 29 (Bloomberg) -- Volkswagen AG, Europe’s largest automaker, said first-quarter operating profit rose 22 percent, helped by record sales at the luxury Porsche and Audi brands.

Earnings before interest and taxes increased to 2.86 billion euros ($3.97 billion) from 2.34 billion euros a year earlier, the Wolfsburg, Germany-based manufacturer said in a statement today. Profit beat the 2.74 billion-euro average of nine analyst estimates compiled by Bloomberg. Revenue gained 2.7 percent to 47.8 billion euros.

VW said last month that its annual sales may exceed 10 million vehicles for the first time in 2014, four years earlier than planned. That includes deliveries by MAN SE and Scania AB, the truck divisions in which VW is seeking full ownership. Those takeovers, and plans to introduce 100 new or revamped cars through next year, are part of a strategy to overtake Toyota Motor Corp. as the global leader in auto sales by 2018.

“From a strategic point of view, the product and brand position of Volkswagen AG is the envy of the industry,” said Roman Mathyssek, a Munich-based analyst at consulting company Strategy Engineers GmbH. “They still have potential to improve further in terms of products, costs and market presence in the years to come.”

Still Counting

The German carmaker said it’s still tallying the shares that investors have pledged in the company’s 6.7 billion-euro tender for full ownership of Scania. The offer expired April 25. Volkswagen said it plans to publish the results soon.

VW already controls 62.6 percent of Scania’s capital via direct and indirect holdings, and it’s offering 200 kronor a share for the rest of the Soedertaelje, Sweden-based company. That’s 36 percent more than the truckmaker’s closing price before the bid was announced in February.

Volkswagen fell as much as 1.3 percent and was trading down 0.2 percent at 194.15 euros at 3:04 p.m. in Frankfurt. The shares have dropped 4.8 percent this year, valuing VW at 89.6 billion euros.

“The situation with Scania causes some uncertainty,” said Frank Schwope, a Hanover, Germany-based analyst at NordLB.

First-quarter operating profit at Porsche jumped 22 percent to 698 million euros, while earnings at the Audi premium division, the biggest contributor to group profit, increased 0.5 percent to 1.31 billion euros, Volkswagen said.

Models that Volkswagen is bringing out by the end of 2015 include new versions of the midsize VW Passat sedan and Audi A4. Among the fresh sport-utility vehicles are Audi’s Q7 and a new plug-in hybrid version of Porsche’s Cayenne.

‘Good Start’

“Our good start to the current fiscal year is an additional proof” that company strategy is working, Chief Executive Officer Martin Winterkorn said in the statement. “We must now continue improving our position and maintain our successful course.”

Volkswagen reiterated a forecast that revenue will “move within a range” of 3 percent of the 2013 figure, with operating profit at 5.5 percent to 6.5 percent of sales. The first-quarter margin was 6 percent.

Even as industrywide demand in Europe improves and helps offset slumping markets in India, Russia and Brazil, pricing in VW’s home region remains competitive, sales chief Christian Klingler said today on a conference call. There are also signs that the North American market is “overheating,” leading to increased pressure to boost incentives, he said.

Action Areas

With demand faltering in emerging markets, “it is more important than ever that we focus on three key action areas: firstly, disciplined cost and investment management; secondly, our profitability targets and thirdly, improved profitability in all regions,” said Chief Financial Officer Hans Dieter Poetsch.

Scania’s operating profit increased 12 percent to 254 million euros, while Munich-based MAN reported earnings of 68 million euros versus a year-earlier loss of 102 million euros.

VW, which already has management control of MAN under a so-called domination agreement, owns just over 75 percent of the truckmaker. It offered in 2013 to buy out remaining investors for 80.89 euros a share, 3.9 percent less than the market price when the bid was announced. As of late October, Volkswagen faced 162 lawsuits in Munich Regional Court from minority MAN shareholders seeking a higher price.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at

To contact the editors responsible for this story: Chad Thomas at Tom Lavell, Chris Reiter

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