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Porsche Net Profit Jumps 44% in H1 FY 2007/08
5 Mar 08
Porsche continues its strong earnings performance in H1 FY 2007/08 as a result of robust sales and its stake in VW.
Global Insight Perspective | | Significance | Despite the spectre of a slowdown in the global economy Porsche has once more posted a strong financial performance in the first half of the company's financial year (1 August 2007 to 31 January 2008), with a net profit of 1.30 billion euro. | Implications | Another set of impressive financial results for Porsche confirms the company's position at the world's most profitable car company and have ensured the financial foundations to take a majority shareholding in VW. | Outlook | Porsche has spent the last five years successfully expanding its model range, and model variants, including the Cayenne SUV and Cayman Coupe. This trend will continue with the launch of four-door Panamera in 2009, thus ensuring the likely continued growth in the company's sales volumes growth and profitability. |
Porsche Continues to Flex its Financial Muscle Porsche has announced that its pre-tax profit for the first half of the company's financial year (between 1 August 2007 and 31 January 2008) increased by 23.6% year-on-year (y/y) to 1.66 billion euro in comparison to the figure of 1.341 billion euro at the same point last year. In a statement on Porsche's website, the company said that this figure includes the proportional income figure that the company earned from its current 31% shareholding in Volkswagen (VW) which Porsche announced earlier in the week it was increasing to a majority stake of 51% (see Germany: 4 March 2008: Porsche Board Agrees to Increase Stake in VW to 51%). This includes the proportional VW result for the fourth quarter of 2006 of about 272 million euro and it is adjusted for the one-off effect of the revaluation of VW stake that resulted in an appreciation of 521 million euro. In the statement Porsche also stated that the company's net profit also increased significantly in the first half of the financial year to 1.295 billion euro up from the figure of 897 million euro recorded during the same period in 2006/2007. Porsche Financial Results for H1 FY 2007/08 | Euro bil. | 2007/08 | 2006/07 | Revenue | 3.49 | 3.07 | Pre-Tax Earnings | 1.66 | 1.34 | Net Earnings | 1.30 | 0.90 |
Strong Sales Underpin Growth The company also stated that revenues also showed a healthy level of growth, improving by 14% y/y to 3.49 billion euro in comparison to the figure of 3.07 billion euro recorded in the same period one year earlier. Sales volumes for the same six-month period also increased in corresponding fashion to 46,736 units, up from the figure of 39,265 units the year before. According to Porsche's statement "the expansion of the dealer network, in particular into the new markets, and also the increased attractiveness of Porsche's product range contributed to these successes." There is no doubt that the company's expansion into lucrative and relatively untapped new markets, such as the Middle East and Asia, have generated significant growth, but the company has also consolidated its position in traditional markets in the Western Europe and the United States. The latter was a particular bright spot for Porsche with sales reaching approximately 16,200 units according to an earlier interim report, an increase of 11.4%.However, by the same token Porsche claims it is well prepared for any sudden downturn in the U.S. market as a result of recession, and it has significantly decreased its inventory in the country as a result. Germany has also shown slight growth during the same period by generating sales of 5,700 units in comparison to 5,498 units the year before. Although 911 sales fell slightly to in the first half period to 16,360 units in comparison to the high figure of 17,329 units recorded the year before, the company's profitability benefited from the launch of top of the range 911 variants such as the 911 Turbo Cabriolet and the 911 GT2, which were well received in the market and boast high margins. Outlook and Implications The reporting period in question was affected by special factors, most notably the contribution to the result provided by hedging transactions in connection with the acquisition of VW shares. This rose from 791 million euro to 850 million euro. In line with Porsche's existing holding in VW's equity, the VW result attributable to Porsche reached 484 million euro versus the prior year figure of 275 million euro. So the first half-financial year results of Porsche's Holding company, Porsche Automobil Holding SE, which now includes its shareholding in VW, would appear to be extremely robust. It is currently generating a strong revenue stream through its shareholding in VW, while its own car business continues to be highly profitable. Stripping out the earnings that were the result of the VW investment and the company's other investment strategies, the company's own car sales operations earned Porsche 324 million euro. The company needs to continue its strong financial performance in order to underwrite the further purchase of VW shares that will take Porsche's holding to a majority share of 51%. This should not present a problem as long as both VW's and Porsche's product portfolios continue to perform well in the market place. Purely from Porsche's perspective, a large portion of its sales hike in 2007 came from the strong performance of the face-lifted Cayenne sports-utility vehicle (SUV), with sales having doubled to around 20,000 units in the first half of the financial year. Sales increases are expected to be supplemented by a face-lifted version of the 911 which is due out this year and the new Panamera four-seater which is due to be launched in 2009.
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