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Volkswagen profit boosted by emerging markets
April 27, 2011 / 9:06 AM / 7 years ago

Volkswagen profit boosted by emerging markets

FRANKFURT (Reuters) - Volkswagen (VOWG_p.DE), Europe’s largest carmaker, posted consensus-busting first-quarter results and affirmed its upbeat 2011 outlook thanks to demand from emerging markets and lower costs.

“We continue to see the most dynamic growth prospects in the emerging markets of Asia and Latin America, whereas the industrialized nations will continue to experience only moderate growth,” Volkswagen said on Wednesday.

Carmakers are looking to booming markets such as Brazil, Russia and China -- now the world’s largest auto market -- for sales growth as European markets stagnate. VW’s first-quarter sales gained 14 percent thanks to demand from outside its home market.

“We don’t want to detract from VW’s strong performance, but we believe it is part of a wider trend for German autos,” analysts at Bernstein Research said.

“The world wants to buy German vehicles, and BMW (BMWG.DE), Mercedes (DAIGn.DE) and VW are taking market share everywhere.”

Shares in Volkswagen, which has a 12 percent share of the global passenger car market, extended gains to trade 4.3 percent higher at 125.90 euros by 1019 GMT. The STOXX Europe 600 Automobiles & Parts .SXAP index was up 2.6 percent.

VW’s operating profit, which does not include earnings from its lucrative China business, surged to 2.91 billion euros ($4.26 billion), surpassing the 2.19 billion estimated on average from a Reuters poll of 11 analysts.


Some European carmakers such as PSA Peugeot Citroen (PEUP.PA) have taken a hit after Japan’s earthquake and nuclear crisis made it difficult to source car parts from there.

Rival Renault (RENA.PA) on Tuesday predicted the impact of the Japan crisis on the auto industry supply chain could lead to slower production in the coming months.

But German auto companies have so far remained relatively unscathed by supply chain problems, and the crisis may create an opportunity for Volkswagen to surpass its top rivals.

Volkswagen has been aiming to surpass Toyota (7203.T), the world’s biggest carmaker, in terms of global auto sales, and the Japan crisis could hamper Toyota’s production enough to push it to the No. 3 spot behind General Motors (GM.N) and VW.

VW warned that the crisis in Japan and its economic impact could adversely affect car production and sales but said it still expected to post higher 2011 revenue and operating profit and to top the record 7.14 million vehicles it sold last year.

“There are concerns about the crisis in Japan dampening the company’s business, but the company has been confident about it,” said Albrecht Denninghoff, an analyst at Silvia Quandt.

VW is due to hold a conference call at 1200 GMT in which analysts will be looking for comments on Japan. Management may also update the market on the probability of debt-stricken parent Porsche SE (PSHG_p.DE) merging into VW’s own cash-rich operations later this year.

VW initially viewed the deal as 90 percent likely, before possible legal risks stemming from Porsche forced VW to scale that down to even odds.

Porsche AG, the sportscar business jointly owned by Porsche SE and Volkswagen, earlier said it more than doubled its operating profit to 496 million euros in the first quarter, with a 10 percent increase in revenue.

(Reporting by Maria Sheahan; Additional reporting by Christoph Steitz; Editing by Chris Wickham and Will Waterman)

$1=.6838 Euro

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