Volkswagen profit growth slows on European market's slump
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BERLIN (Bloomberg) -- Volkswagen Group reported slowing earnings growth as the impact of the sovereign debt crisis weighed on demand in its home region.
Second-quarter operating profit rose 3.4 percent to 3.28 billion euros ($3.98 billion), the company said today. That compared with a first-quarter increase of 10 percent. Second-quarter revenue gained 19 percent to 48.1 billion euros. Sales climbed 26 percent in the first quarter.
Volkswagen, which sells nearly 25 percent of all cars bought in Europe, was unable to continue its global growth momentum as the region's car market drops for a fifth year.
The automkaer today stuck to its 2012 target of matching last year's record operating profit of 11.3 billion euros as higher demand for Audi and VW brand cars in China and the United States, the world's two biggest auto markets, softens Europe's slump.
"VW is not immune to the crisis," said Michael Punzet, a DZ Bank analyst in Frankfurt. "But the U.S. and Chinese markets can offset most of the negative effects in Europe. Another advantage compared with VW's competitors is that its home market is still performing better than, for example, the French or Italian."
Audi profit
Audi, which accounted for 46 percent of the group's operating profit in the second quarter, generated a return on sales of 11.6 percent, beating Daimler's Mercedes-Benz, which posted an 8.6 percent margin. VW's Chinese joint ventures, which aren't included in the group's operating earnings, recorded a second-quarter profit of 930 million euros.
"Our strong position in the international markets will enable us to outperform the market as a whole -- despite the challenging environment," Chief Executive Officer Martin Winterkorn said in a statement.
VW's second-quarter European sales declined 2 percent, compared with 0.5 percent growth in the first three months, according to figures from the ACEA auto industry group.
Tougher German market
Volkswagen may face a tougher second half in Germany. The VDA industry association forecast that the market will slip to 3.1 million vehicles this year from 3.17 million in 2011. The softer demand has increased discounts in Germany, which reached a record level this month, according to Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.
Volkswagen's global first-half deliveries gained 10 percent to 4.55 million, while revenue in the period climbed 23 percent.
"In the second half, VW will not be able to maintain double-digit growth anymore," said Frank Schwope. "Unit sales are more likely to be up 5 percent throughout the rest of the year."
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