Volkswagen Reports Higher Earnings

Friday, October 27th 2000, 12:00 am
By: News On 6

FRANKFURT, Germany (AP) — Riding a booming U.S. auto market and a wave of hot-selling exports, Volkswagen AG posted a nearly 50 percent increase in adjusted net earnings Friday for the first nine months of the year.

The German automaker said net profit for the January-September period rose 49 percent to 2.24 billion marks ($940 million) from 1.5 billion marks a year ago, after stripping out one time charges and gains.

That beat analyst expectations of only a 23 percent increase, and Volkswagen forecast record net profits for the year. VW didn't name a figure, but Deutsche Bank said it expects Volkswagen will earn 3 billion marks ($1.26 billion), up 81 percent from last year's net earnings of 1.65 billion marks.

``Exports benefited further from the low level of the euro and from the strength of world trade,'' Volkswagen said, adding that weakness in the German market was more than offset by sales growth in North America and Asia.

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The sinking euro, which is pegged to the German mark as part of European Monetary Union, makes German exports cheaper and more attractive overseas. But the VW group, which includes such brands as Audi, Rolls-Royce, Lamborghini, Seat and Skoda, also admitted that results were being compared with results a year ago that were depressed by higher taxes.

The group's nine-month revenue rose 14 percent to 125.4 billion marks ($52.7 billion) from 110.1 billion marks last year. That also beat forecasts.

Investors rallied behind the stock, driving it up 5.63 percent to 56.30 euros ($46.73) in Frankfurt trading.

For the third quarter of 2000, Volkswagen reported a net income of 984 million marks ($413.3 million) and revenues of 42.1 billion marks ($17.7 billion). But the company did not provide separate third-quarter figures from 1999 for comparison.

Revenues at the company's flagship brand, Volkswagen, rose 9.4 percent to 63.25 billion marks ($26.6 billion) from 57.81 billion marks a year ago, boosted largely by strong sales in North America.

The results come just a day after rival DaimlerChrysler AG reported a 78 percent drop in adjusted third-quarter earnings, as the cost of launching new models in the U.S. caused sharp losses at its American-based Chrysler division.

``German players are niche players in the North American market, and you can't compare them to Ford, General Motors or Chrysler. They don't feel the same kind of price pressure,'' said Lars Ziehn, an auto analyst with Deutsche Bank.

Volkswagen said the company should benefit from a continuing upswing in the Germany economy but said passenger car deliveries in its home market fell 11 percent to 781,000 vehicles. Worldwide deliveries for the group rose 3.1 percent to 3.8 million vehicles.

Volkswagen also hinted it was on the prowl for a corporate takeover, saying its share buyback program, started Sept. 15, is intended to boost share price and build a war chest ``to be used partially or in total for the acquistion of companies or participations.''

Various German newspapers have reported in recent months that Volkswagen might be interested in making a bid for Munich-based luxury car maker BMW AG.

Volkswagen said that it has bought back more than 3 percent of its own shares since Sept. 30, bringing its holdings to over 5 percent, or just over 20 million shares. That's a stockpile of 1.1 billion euros ($913 million), based on Friday's stock price.