Audi and Porsche Drive Volkswagen to Double-Digit Profit Gains

Sales records reached by Audi and Porsche have helped propel Volkswagen AG’s (VLKAY.PK) first-quarter operating profit up 22 percent, as earnings before interest and taxes rose to 2.86 billion euros ($3.97 billion), up from 2.34 billion euros a year earlier, Volkswagen said Tuesday.

That was enough to surpass the 2.74 billion euro average of nine analyst estimates calculated by Bloomberg. Revenue gained, too, up 2.7 percent to 48.7 billion euros. It’s a promising sign that comes after the company projected that it may reach sales of 10 million vehicles worldwide this year, four years ahead of schedule, and accounting for the sales of its heavy truck interests, MAN and Scania. VW is pursuing full ownership of both brands.

“From a strategic point of view, the product and brand position of Volkswagen AG is the envy of the industry,” Roman Mathyssek, a Munich-based analyst at consulting company Strategy Engineers GmbH, told Bloomberg. “They still have potential to improve further in terms of products, costs and market presence in the years to come.”

Volkswagen also plans to launch 100 new models globally through next year over its portfolio of brands, including a new VW Passat sedan and Audi A4, in efforts to overtake Toyota  as the top automaker in the world.

However, “the situation with Scania causes some uncertainty,” Frank Schwope, an analyst at NordLB, said to Bloomberg. Volkswagen is still tallying up the shares that investors have put forth for the company’s 6.7 billion euro tender offer for the full ownership of the Scandinavian Scania brand. The offer expired April 25, and Volkswagen said it plans to publish the results soon, Bloomberg reports.

VW now controls 62.6 percent of Scania’s capital by means of direct and indirect holdings, and it’s offering 200 kronor ($30.50) per share for the rest of the Swedish company, 36 percent more than the truck brand’s closing price prior to the bid, which was announced in February. 

Heavy trucks aside, it’s Volkswagen’s luxury real estate that’s really bringing in the results for the company. Porsche, fresh off revealing its first small SUV, saw its operating profit jump 22 percent to, 698 million euros, during the first quarter, while earnings at Audi grew a modest 0.5 percent to 1.31 billion euros, Volkswagen said. That’s significant, however, since Audi is the company’s biggest contributor to group profit.

“Our good start to the current fiscal year is an additional proof” that company strategy is working, Bloomberg cited Chief Executive Officer Martin Winterkorn as saying in a statement. “We must now continue improving our position and maintain our successful course.”

The core Volkswagen brand, which is supposed to be its volume-mover in the U.S., has hit struggles in the face of highly competitive rivals, and sales in the States have struggled to the point that Volkswagen is considering some early refreshes for its current models. The company knows something must be done, but whether it will be done in time to reach VW’s ambitious goals is another deal altogether.