Porsche expects profit growth to resume in 2014 as Macan, 918 Spyder join the lineup

Article by Christian Andrei, on October 9, 2013

Porsche believes that with the entry of the Macan compact SUV and the 918 Spyder hybrid to its product lineup, the brand’s profit growth is predicted to resume in 2014. Porsche Chief Financial Officer Lutz Meschke said that the Volkswagen Group brand is aiming for a boost in earnings before interest and taxes next year after a surge in spending on new vehicles prevents operating profit from increasing in 2013.

Meschke said that the expenses for the capacity expansion and the new model lines will be much higher in the second half of the year compared to the first half. He said that the goal of Porsche is to increase profit in 2014.

In August 2012, Volkswagen was able to get full control of Porsche's automaking operations. Volkswagen benefited from the earnings from the division and other luxury brands like Audi and Bentley and helped cushion the fallout from domestic financial difficulties as the demand for new cars is at its lowest for the past two decades.

Daniel Schwarz, a Frankfurt-based analyst at Commerzbank AG, said that Porsche earnings are expected to increase next year. He said that the Macan is believed to be the “key earnings driver” in 2014, particularly in the second half of the year.

He also thinks that this is also when the 911 lineup will reach its peak. Meschke said that Porsche’s investments this year will surpass 1.3 billion euros ($1.76 billion), and will then reach an annual total of more than 1 billion euros as of 2014.

The CFO said that the business will continue to finance projects from operating cash flow, and its automotive unit doesn’t intend to look for resources in the capital market.

He explained for now, the company is in “a very good position” when it comes to financing. Porsche is the No. 3 biggest earnings contributor after Audi and the mass-market VW passenger-car brand as it is responsible for 1.29 billion euros of Volkswagen Group's first-half operating profit of 5.78 billion euros.

The division's operating return on sales of 18% means that it is one of the most profitable car manufacturers in the world. Porsche’s long-term financing includes a 1 billion euro bond maturing in 2016 and 500 million euros in promissory notes issued in 2012 that cover four to six years.

Meschke said that after the division was integrated into VW, it was able to access to internal credit lines on more affordable terms than on the external market. The CFO said that the objective is to eliminate net debt totally over the next couple of years.

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