FRANKFURT - Shares in Volkswagen AG dropped to a three-year low as investors bailed out after 1999 net profits fell by more than a quarter.
VW was the worst performer on Germany's DAX share index in last Wednesday's (January 23) session after it said late on Tuesday that 1999 net profit fell 26 percent to a lower-than-expected DM1.65 billion (A835.6 million) after a heavy tax burden.
VW's earnings performance disappointed investors and knocked its share price 6 percent lower to A42.30.
The following day (February 24) VW's shares declined further, to A40.15 - its lowest close since early March 1997, when it languished around the equivalent of A40.
Although VW was able to lift worldwide deliveries in 1999 by 6 percent to a record 4.9 million cars and vans, analysts said they were troubled because the company had not translated booming sales into profit growth.
Analysts said VW's earnings had come under pressure from tough competition in Europe, poor sales in Latin America and heavy investment in new luxury brands.
VW said its 1999 pre-tax profit dropped almost 22 percent to DM4.9 billion despite sales rising to DM147 billion from DM134.2 billion in 1998.
If it had not suffered a DM389 million tax burden due to German tax reforms, 1999 net profit would only have fallen to about DM2 billion from DM2.2 billion in 1998, the group said in a statement.
l Volkswagen AG will switch from German accounting standards to International Accounting Standards (IAS) by 2001. Klaus Kocks, VW's head of communications, said the move was being made 'to deliver the market with more transparency. The switch to IAS will make comparisons with other carmakers easier.' VW's reputation for a lack of transparency is seen many analysts and investors as a large part of the reason for its lagging share price.
Geoff Barton and Reuters News Service