* Q1 operating profit 2.9 bln euros vs 2.3 bln a year ago
* Repeats profit, sales and revenue outlook
* Analsyst say full-year guidance may be too conservative
* Q1 results hit by 2 bln euro currency costs -CFO
(Adds Q1 currency impact, CFO comments on cost cuts)
By Andreas Cremer
BERLIN, April 29 Record sales of luxury Audis
and Porsches boosted Volkswagen's first-quarter
operating profit by 22 percent and left analysts expecting an
upward revision of the German carmaker's 2014 earnings guidance.
The German group stuck to its previous guidance in Tuesday's
quarterly results, saying that its operating margin could be
between 5.5 and 6.5 percent after 5.9 percent last year. In
February it also said that economic conditions need to improve,
especially in Europe, for it to achieve record full-year profit.
But analysts said the carmaker was understating its
prospects. Its first-quarter operating profit of 2.86 billion
euros ($3.96 billion) beat the average estimate in a Reuters
poll of analysts by more than 4 percent.
"There's an 80 percent chance VW will raise its guidance in
the next three to four months," Frankfurt-based Metzler Bank
analyst Juergen Pieper said, citing the recovering European
economy and growing production savings from efforts to boost
commonality of parts across VW's many brands and models.
European car sales, which make up 40 percent of VW's group
sales, made their seventh straight monthly gain in March after a
six-year slump that cut registrations to a 20-year low.
VW is running extra production shifts at its main Wolfsburg
plant during the second quarter to meet excess demand for its
Golf and Tiguan models.
"We're now more confident on the situation in Europe (than
at the start of the year)," sales chief Christian Klingler said
in a conference call.
First-quarter deliveries of Audi and Porsche models, which
account for about two thirds of VW group earnings before
interest and tax (EBIT), were up 11.7 percent and 4.5 percent
respectively to 413,000 and 38,700 cars.
VW shares closed 1.2 percent lower at 191.90 euros as the
market bemoaned the lack of a more upbeat outlook and a sharp
decline in automotive cash flow, a closely watched metric for
the quality of earnings, analysts said.
The company has used resilient profits to boost investment
during the European recession that plunged French and Italian
peers into the red, but falling sales in North America, as well
as Brazil, Russia and other emerging markets with volatile
currencies, took the edge off the group's quarterly performance.
Generating cash to fund global expansion is getting harder
as VW balances rising short-term costs, such as 2 billion euros
in negative currency effects during the first quarter, with
upgrades and additions to a fleet of more than 310 models.
"It's more important than ever that we focus on three key
areas - disciplined cost and investment management,
profitability targets and improved profitability in all
regions," finance chief Hans-Dieter Poetsch said.
The need for cost cuts is nowhere more apparent than at VW's
core passenger car brand, which accounted for almost two thirds
of the group's 2.4 million first-quarter deliveries, analysts
Stagnant volume, high fixed costs and technology outlays
shrank the VW brand's margin to a dismal 1.8 percent, compared
with a 6 percent long-term target.
By comparison, VW's results in the first quarter of 2013 had
been hit by about 350 million euros of provisions at the
engineering division MAN SE for a failed power plant
project and the cost of an overseas vehicle recall.
VW expects to increase 2014 group deliveries slightly from
last year's record 9.7 million vehicles and says sales will come
in within a range of 3 percent around last year's 197 billion
($1 = 0.7223 Euros)
(Editing by David Goodman)