October 22, 2010 / 1:58 PM / 9 years ago

UPDATE 2-Volkswagen beats forecasts with Q3 op profit

* VW says business growth won’t continue as strongly

* Q3 oper profit 1.99 bln eur vs Reuters poll avg 1.24 bln

* No seasonally usual deterioration from Q2 to Q3

* Automotive net cash grows to 19.64 bln eur at end-Sept

* VW shares up 3.2 pct at 96.76 euros, index up 1.1 pct (Recasts adding analysts, details)

By Christiaan Hetzner

FRANKFURT, Oct 22 (Reuters) - Volkswagen (VOWG_p.DE) beat all forecasts with a huge jump in third-quarter operating profit to 1.99 billion euros ($2.77 billion), thanks to a rebound in demand that reduced the need for rebates.

The operating profit in the seasonally weak quarter was identical to that posted in the seasonally strong second-quarter — something almost unheard of in the auto industry. [ID:nLDE69L0Q8]

“VW just delivered the highest absolute level of Q3 profits in its history and one of the highest ever margins achieved in any quarter,” Bernstein analyst Max Warburton wrote in a research note.

Shares in Europe’s largest carmaker traded up 3.18 percent at 96.76 euros by 1628 GMT, easily outperforming the European auto index .SXAP, which was up 1.1 percent.

Nevertheless, Volkswagen warned the trend would not hold.

“The successful business growth of the Volkswagen Group in the first nine months of 2010 will not continue as strongly in the fourth quarter,” the company said in an unscheduled statement published on Friday.

Analysts dismissed the company’s downbeat guidance for the fourth quarter as overly conservative.

“The only thing I would criticise is the far too cautious guidance. When they write that the fourth quarter will be weak, I would almost be inclined to forget this entirely based on past experience,” said Metzler Bank’s Juergen Pieper.

The company’s war chest surged to a dizzying 19.6 billion euros in net cash by the end of September as revenue grew much faster than investments thanks to a rebound in demand that severely reduced the need to offer margin-eroding rebates.

“VW is generating enough cash to buy Alfa Romeo once a quarter, to buy PSA (PEUP.PA) every year and may soon have the funds to take out MAN and Scania in their entirety (...) VW can afford to do almost anything,” Warburton wrote.


On a pretax basis, earnings were even better thanks to income generated by its financial stakes in companies like MAN (MANG.DE), Porsche AG sports cars and its joint ventures in China, as well as the valuation of an option to buy the remainder of Porsche AG.

“We believe that the group’s sales revenue and operating profit in 2010 will continue to perform positively, despite shifts in volumes between the markets,” it continued, adding that exchange rate effects would give profits a boost.

A Reuters poll forecast an average operating profit of 5.23 billion euros for the full year — an amount that at VW’s current rate could be easily achieved by the end of this month.

VW will post full-quarterly results and hold a conference call with analysts on Oct. 27. (Reporting by Christiaan Hetzner; Editing by Sharon Lindores) ($1=.7187 Euro)

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