VW Braces for First-Quarter Proift Drop on Europe Market

Volkswagen AG, Europe’s largest carmaker, is preparing for a drop in first-quarter earnings as the region’s auto market enters its sixth year of declines.

Profit in the first three months “will be clearly below” the first quarter of 2012, Chief Financial Officer Hans Dieter Poetsch said in an interview with Frankfurter Allgemeine Sonntagszeitung, without providing additional details. Christine Ritz, a VW spokeswoman, confirmed his remarks.

Sales growth in China, North America and Russia helped the Wolfsburg, Germany-based company to more than offset the market drop in Europe last year. The region’s downturn is expected to deepen in 2013, though, with auto executives forecasting new-car sales will shrink as much as 5 percent.

“The situation in Europe won’t get easier this year,” Fairesearch analyst Hans-Peter Wodniok said via telephone. VW’s footprint in emerging markets and growth in the U.S. should help it to cope with increasing headwinds in region, he said, adding that the share price slump of 7.1 percent on Friday was “a bit exaggerated.”

The stock climbed as much as 3.95 euros, or 2.6 percent, to 168 euros and was up 2.5 percent as of 10:08 a.m. in Frankfurt. The shares have dropped 2.5 percent this year, valuing the German company at 75.3 billion euros.

Volkswagen said Feb. 22 that 2013 operating profit will match last year’s level, falling short of analysts’ estimates.

Earnings before interest and taxes, which rose 2.1 percent to 11.5 billion euros ($15.2 billion) in 2012, probably won’t increase this year as the shrinking car market in its home region weighs on earnings, it said then.

Europe Sinks

Moody’s last week lowered its estimate for European light vehicle sales this year to a 5 percent decline from a 3 percent decrease previously.

“This is mainly due to weaker-than-expected demand in northern European countries, especially Germany and the U.K., and the absence of a recovery in southern Europe,” Moody’s analyst Falk Frey said in a report.

New-car registrations in the region last month were the least for a January since records began in 1990, following a drop to a 17-year low for all of 2012, according to the ACEA auto-industry association.

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