VW net profit up 58 percent on accounting gain

Volkswagen's earnings boosted by revaluation of Porsche stake, but operating earnings fall

Associated Press
VW net profit up 58 percent on accounting gain
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FILE - In this March 12, 2012 file photo a company logo is pictured …

FRANKFURT, Germany (AP) -- German automaker Volkswagen AG saw net profit rise 58 percent in the third quarter because of an accounting boost from its takeover of Porsche, but other profit measures fell and the company said it was facing an uncertain economic environment.

The company held on to its full year forecast for earnings equal to last year's, and said the full integration of Porsche and the company's presence in all major regions of the world meant it was in good shape.

Nonetheless, the numbers at the opening of earnings season for German carmakers suggested that they could no longer completely escape the downdraft from the eurozone debt crisis that has walloped consumers in Greece, Spain, Portugal and Italy.

Volkswagen, Daimler, and BMW have reaped fat earnings from strong export sales of more profitable luxury vehicles to the U.S. and China. But analysts say pricing and margins — the amount earned on each car — are under pressure at home in Europe and in the Chinese market, even though the economy there may be growing.

Volkswagen group net profit rose to €11.38 billion ($14.8 billion) from €7.14 billion in the same quarter last year, strongly boosted by gains from the complex deal that made Porsche one of VW's 12 brands. Global sales rose 27 percent to €48.84 billion.

Analysts at Sanford C. Bernstein have said the non-cash gain from the complex Porsche deal would be around €7 billion in the quarter, citing guidance from company officials. It involves re-valuing options and how the Porsche stake is accounted for on Volkswagen's books.

Operating earnings — excluding financial items such as interest and taxes, as well as the effects of the merger — fell 19 percent to €2.34 billion from €2.89 billion.

Operating earnings give an incomplete view of a company's finances, but are often used by analysts and investors to get a better focus on how the company's core activity is developing. The operating earnings figure was in line with the consensus estimate of €2.35 billion among analysts surveyed by financial information provider FactSet.

Volkswagen had strong sales in the U.S., its home market of Germany and in China, where sales rose 21 percent. It saw tougher markets however in southern Europe due to the eurozone debt crisis, particularly at its Spanish SEAT subsidiary. Spain has an unemployment rate of 25 percent.

CEO Martin Winterkorn said the company remains "committed to our ambitious goals for 2012, despite growing headwinds."

He said the company was well positioned due to its young model lineup, its global presence, and to the addition of Porsche, whose results were added to the company's earnings for the first time. The company confirmed its forecast that this year's operating earnings will equal those last year, and that sales will exceed last year's.

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