UPDATE 1-VW's Skoda sees sales growth returning after 2013 profit drop

Mon Mar 17, 2014 9:33am EDT

* Jan-Feb sales show Skoda's best ever start to year

* Skoda sees sales passing 1 million for first time

* After-tax profit falls 25.5 pct in 2013 as sales dip (Adds dividend, quotes, Ukraine/Russia comment)

By Jan Strouhal

MLADA BOLESLAV, Czech Republic, March 17 (Reuters) - V olkswagen's Czech unit Skoda Auto expects to return to sales growth this year thanks to a build-up of orders and signs of recovery in many of its markets, the carmaker said on Monday after posting a 25.5 percent drop in 2013 profit.

The top Czech exporter and bellwether of the economy also said it would pay out more than half of its after-tax profit of 455 million euros ($634 million) to its German shareholder.

Skoda is counting on the launch of new models to propel it towards a goal of selling 1.5 million cars annually by 2018 and has said it is set to hit 1 million for the first time in 2014. Sales dipped 2 percent to 920,800 cars in 2013.

"A pleasing start to the year, a good level of orders and ever-more positive signals from (European) markets convinces us that we will be able to continue in growth this year," Skoda Chief Executive Winfried Vahland said.

The Czech economy, heavily reliant on car plants run by Skoda, Hyundai and a joint venture of Toyota-Peugeot , is gaining traction after a record long recession ended in the second quarter last year, mirroring a pattern across much of Europe.

Skoda's sales suffered in the first half of 2013 during the switchover to a new version of its flagship Octavia family car but have since rebounded as production was ramped up to meet a backlog of orders.

Sales jumped by 16.5 percent in January and rose 4.5 percent in February, helping it post its best ever start to a year.

The success of VW's mass-market brands, comprising Skoda, Seat and its core VW cars, are crucial to the German group's goal to become the world's biggest automaker by 2018.

WATCHING UKRAINE

Skoda will look to new models to boost sales in the coming years and last week said it would produce a new model at its Kvasiny plant, one of three it operates in the Czech Republic.

It has not said which model. VW is due to decide on whether to produce a new sport-utility vehicle (SUV) for Skoda and Seat in the Czech Republic or Spain. Officials declined to comment on Monday.

Skoda's sales last year grew in Europe, where it makes about two thirds of revenues, despite a sluggish economy hurting car demand, although China was again its biggest individual country for sales.

"Europe is and will stay our main market. The goal is to increase our market share in Europe to more than 5 percent, currently we have over 4 percent," Vahland said.

He added the company was not expecting a severe impact on markets in Russia and Ukraine because of a building crisis over the latter's Crimea region, which formally applied to join Russia on Monday in a move that will trigger European sanctions.

"Russia and Ukraine are important markets for us (so) we are monitoring the situation there," Vahland said. "We do not expect harsh sanctions against Russia."

Skoda's deliveries in Russia dropped to 87,500 cars in 2013, from 99,100 cars in 2012.

($1 = 0.7181 euros) (Writing by Jason Hovet and Robert Muller; Editing by Mark Potter)

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