VW Profit Beats Estimates on Higher Earnings at Audi

Volkswagen AG, Europe’s largest automaker, reported second-quarter profit that beat analysts’ forecasts as growth at the Audi luxury division helped offset a decline at its namesake brand.

Earnings before interest and taxes slipped 3.1 percent to 3.33 billion euros ($4.46 billion), the Wolfsburg, Germany-based manufacturer said in a statement today. The figure was higher than the 3.31 billion-euro average of 13 analyst estimates compiled by Bloomberg.

“The results show quite remarkable resilience if you consider the economic environment,” Roman Mathyssek, a Munich-based analyst at Strategy Engineers GmbH consulting company, said by phone.

After years of emphasizing sales growth to pursue its goal of surpassing Toyota Motor Corp. as the world’s biggest carmaker, Volkswagen is shifting focus to profitability. At the VW car brand, the group’s biggest unit, Winterkorn plans to cut costs and boost productivity by 5 billion euros by 2017.

“In light of the continued strong competitive pressures, the tense situation in some emerging economies and the fundamental technical and economic changes happening in our industry, we are working hard to create all the conditions we need today to ensure success tomorrow,” Chief Executive Officer Martin Winterkorn said in the statement.

VW shares advanced as much as 2 percent and were up 1.4 percent at 178.20 euros at 12:27 p.m. in Frankfurt trading. The stock has fallen 13 percent this year, valuing the company at 84.5 billion euros.

Apple-Like Development

Volkswagen stuck to its forecast that operating profit will amount to 5.5 percent to 6.5 percent of sales, which may rise or fall by 3 percent. The automaker’s margin narrowed to 6.5 percent in the second quarter from 6.6 percent a year ago, as Audi and Czech-unit Skoda helped shore up profitability.

The VW brand’s second-quarter Ebit tumbled 37 percent to 572 million euros. The carmaker is spending on overhauling the European edition of the Passat mid-sized sedan. Volkswagen also plans to invest $900 million to build a new seven-seat sport-utility vehicle in Tennessee to revive flagging U.S. sales. The unit’s margin was 2.3 percent, compared with medium-term target of 6 percent.

In addition to lowering purchasing expenses at the VW brand, the world’s No. 2 carmaker is mobilizing a team of 40 to 60 top managers to accelerate vehicle and technology development to mimic the fast-paced rollouts of consumer electronics companies like Apple Inc.

Audi A3

Robust sales growth in China and rising demand for Audi vehicles are keeping VW on track to exceed 10 million annual deliveries worldwide for the first time in 2014, four years earlier than initially anticipated. It plans to introduce 100 new or revamped vehicles through next year to put pressure on Toyota, which held a slim lead in the first half.

Audi, the world’s second-largest luxury-car brand, has been closing the gap to Bayerische Motoren Werke AG’s namesake marque on the back of new cars like the A3 sedan. The Ingolstadt, Germany-based unit’s operating profit in the second quarter rose 1.5 percent to 1.36 billion euros.

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