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VW's Full Results Show Net Profit Doubling to EUR15.8 Bil. in 2011, Sales Up 15.1% in February

Published: 3/12/2012
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The VW Group has posted record sales volume, revenue and earnings in 2011, according to the company's full consolidated results.

IHS Global Insight Perspective



The Volkswagen (VW) Group has set new records after posting its fully consolidated financial results for 2011 with net profit more than doubling to EUR15.8 billion.


The VW Group is currently the pre-eminent financial performer in the global industry and with revenues rising by more than a quarter in 2011 and operating profit also doubling, it is enjoying a golden age in terms of its financial results.


The strong financials are backed up by strong sales growth as VW looks to become the unchallenged biggest global carmaker by sales volume. Despite fourth-quarter figures showing signs of slowing momentum, VW is confident of repeating its 2011 results in 2012 despite uncertainty over the global economic environment.

According to the full consolidated financial results that the company has just released, the Volkswagen (VW) Group doubled its net and operating profits in 2011 and set new records for these figures. The results showed that profit after tax or net profit more than doubled to EUR15.8 billion (USD20.7 billion), up from EUR7.2 billion, while profit before tax more than doubled to EUR18.9 billion, a year-on-year (y/y) rise of more than EUR10 billion. Operating profit also rose strongly, up EUR4.1 billion to reach EUR11.3 billion. According to VW, the strongest contributory factors to this improvement in operating performance were an improvement in sales volume, product mix and pricing effects. There were also product development cost savings of EUR1.1 billion, and there was a negative effect on the operating result of EUR2.6 billion arising from rising input costs, depreciation and amortisation. This primarily resulted from the Group's accelerated growth strategy and development costs relating to the expansion of the Group's product portfolio. Most important of all, the company's operating margin posted a very strong improvement from 5.6% in 2010 to 7.1% to 2011. The consolidated operating result does not include the EUR2.6-billion profit generated in 2011 from its Chinese joint ventures (JVs). Shanghai-VW and FAW-VW are included using the equity method and are therefore included in the financial result, which rose by EUR5.8 billion to EUR7.7 billion last year. This extremely strong result for 2011 means that the board of management will propose a dividend increase to EUR3, up from EUR2.20 in 2010, while the preference share dividend will be raised to EUR3.06, up from EUR2.26 last year. These incredibly strong financials were generated off the back of a 25.6% y/y increase in sales revenue to EUR159.3 billion.

VW Group's 2011 Consolidated Financial Results (EUR, Bil.)




% Change





Operating Profit




Net Profit




VW's net liquidity feel slightly to EUR17 billion, down from EUR18.6 billion in 2010, but given the large-scale investment programme undertaken during the year this is actually hugely impressive and VW has the strongest cash position in the global industry. The investment programme in 2011 included the acquisition of Porsche Holding Salzburg, an increase in the stake in MAN SE and the equity investment in SGL Carbon SE, totalling some EUR7 billion, as well as increased investments in property, plant and equipment to around EUR8 billion.

VW also posted its global sales results for February and it appears to be continuing its very positive sales growth momentum, despite coming from a very high base level. Sales volumes in February rose by 15.1% y/y to 642,300 units, a more rapid increase than the slow growth posted in January. The combined year-to-date (YTD) increase rose by 7.7% to 1.29 million units, which meant that the Group outperformed the increase in the global market of 6%, according to the company's own data. However, despite the strong performance, sales chief Christian Klinger said that VW would remain vigilant about the ongoing development of the global economy in 2012, with specific reference to Western Europe. VW managed to expand its sales in Western Europe in the first two months of the year by 1.3% y/y to 532,700 units, although the February figure actually slumped by 7.0% to 281,200 units. The Group announced encouraging delivery figures for the Asia-Pacific region in the first two months of the year, handing over 451,200 (394,600; +14.4%) vehicles to customers there, of which 397,400 (350,600; +13.4%) units were delivered in China, the largest single market. In India, deliveries increased by 23.1% to 19,800 (16,100) units. In the US, sales rose by 25.7% y/y to 110,100 units during the first two months of the year.

Outlook and Implications

The VW Group's 2011 sales results show a company that is at the peak of its powers and which is enjoying the fruits of a global sales and model strategy that is aimed at honing profitability and encouraging growth in the emerging markets. During the year, the company set new records for sales, sale revenue and earnings, with more than 8 million units being sold for the first time in 2012. VW's large cash war chest means that it is in a strong position to make future acquisitions and also complete the full equity takeover of Porsche SE which it is now looking at completing after all but abandoning plans to acquire Porsche through a legal merger. This will further improve VW's profitability and operating margin as it will finally be able to incorporate Porsche SE's financial results into its own. As part of a complex agreement signed in August 2009 to forge a joint company, VW and Porsche's holding firm mutually granted each other put and call options to integrate Porsche's sports car business into VW if a decision on a fully fledged merger could not be reached by the end of 2011 as planned. As part of the deal, VW acquired a 49.9% stake in Porsche's sports car unit for around EUR3.9 billion. However, the full takeover of the remaining shares in Porsche will not come before next year as VW can only exercise the respective call option to buy the remaining 50.1% stake in Porsche Zwischenholding GmbH between 1 March 2013, and 30 April 2013, or between 1 August 2014, and 30 September 2014. Further acquisitions cannot be ruled out, and the company certainly has the cash resources to make further purchases. There has long been talk that VW is interested in the Alfa Romeo brand but Fiat has thus far steadfastly refused to countenance such a deal. The only clouds on the horizon for VW remain the ongoing poor sales and financial performance of the SEAT brand. SEAT is about to launch a new generation of models and it may be the brand's last chance to turn itself around otherwise VW may decide to make Skoda its defined entry-level brand on a global basis and abandon SEAT altogether.

VW remains on target to sell 10 million units and the Group's market share has risen by 2.7% since 2007. Therefore the company remains well on track to meet its "Strategy 2018" goal of becoming the world's biggest carmaker by sales volume. However, Strategy 2018 is also about a holistic approach to making the VW Group the global leader by all kinds of measures, including to be the most ecological carmaker in the world. Last week, it announced that it intends to have its vehicle fleet emit less than 120g/km CO2 for the first time. The strong sales performance in the first two months of the year is a positive development, although the already high base levels means that constant growth will be hard to maintain, especially given the uncertainty surrounding the development of the macroeconomic situation in Western Europe. However, 40 new model launches, including the new Golf and Audi A3 will maintain significant momentum in the market.

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