VW’s second-quarter earnings buck the trend

Volkswagen’s second-quarter earnings unexpectedly rose as new models and lower costs helped Europe’s biggest automaker offset slumping car demand in its home region.

Operating profit rose 1.8 per cent to €3.44 billion. Analysts were anticipating earnings to decline to €3.07 billion. Sales advanced 8.5 per cent to €52.1 billion.

"The numbers look very good," said Daniel Schwarz, a Frankfurt-based analyst with Commerzbank AG. "VW's earnings really accelerated in the second quarter," putting the company "well on track" to achieve its full-year earnings targets.

The second-quarter performance follows a 26 per cent drop in operating profit in the first three months of 2013, trimming its decline for the year. Higher demand worldwide for Audi and Porsche models have helped offset weaker deliveries of mainstream vehicles in Europe, where industrywide demand is sliding to a 20-year low.

Volkswagen’s shares rose as much as 2.2 per cent to €180.05 and were up 1.6 per cent in mid-morning trading in Frankfurt. The stock has advanced 3.9 per cent this year, valuing the company at €81.1 billion.

"We made considerable progress following a subdued start to the year, and can report a solid result in what was a difficult market environment," Chief Executive Officer Martin Winterkorn said. Backed by profits from its growing luxury-car business, Volkswagen stuck to a forecast for full-year operating profit to be on the same level as 2012, even after earnings in the first six months of 2013 declined 12 per cent.

The company expects revenue to rise this year, driven by higher auto sales. VW expects to outperform global auto markets and intends to progressively bring down costs in the coming quarters by rolling out parts-sharing technology among its brands.

The German manufacturer said it won’t be able to escape the impact of weak markets. “We are not completely immune,” VW said. “While we shall see positive effects from our attractive model range and strong market position, there will also be increasingly stiff competition in a challenging market environment.”

Bloomberg