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Volkswagen Management Discusses Q3 2010 Results - Earnings Call Transcript

Volkswagen Management Discusses Q3 2010 Results - Earnings Call Transcript

Volkswagen Group (



Q3 2010 Earnings Call

October 27, 2010 7:00 AM EST


Christine Ritz – Head, IR

Hans Dieter Pötsch – Member of the Board of Management and Head, Finance and Controlling

Christian Klingler – Member of the Board of Management and Head, Group Sales and Marketing


Horst Schneider – HSBC

Thierry Huon – Exane BNP

John Lawson – Citi

Brian Johnson – Barclays Capital

Alexis Albert – Nomura

Daniel Schwarz – Commerzbank

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Jochen Gehrke – Deutsche Bank

Lothar Lubinetzki – MainFirst

Arndt Ellinghorst – Credit Suisse

Philippe Houchois – UBS

Christoph Rauwald – Dow Jones

Daniel Schäfer – Financial Times


Christine Ritz

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Joining me today are Hans Dieter Pötsch, Member of the Board of Management, Volkswagen AG, responsible for Finance and Controlling; and Christian Klingler, Member of the Board of Management, Volkswagen AG, responsible for Group Sales and Marketing.

You can also follow the webcast and download the charts from our website, Questions can be sent by e-mail or called in. Following the presentation, we will take first the questions of analysts, while keeping time at the end for questions from journalists.

Let me now hand you over to Mr. Pötsch.

Hans Dieter Pötsch

Thank you and allow me to add my warm welcome to those of you joining this call today. Over the first nine months of 2010, the Volkswagen Group has continued to move strongly and successfully ahead with the implementation of our strategy 2018. With the number of new model introductions in Europe to US and to China, and now with the youngest model portfolio in our history, more customers than ever are buying the new car or truck from the Volkswagen Group.

Across our regions and for almost all our volume and premium brands, deliveries are up close to 13% on the first nine months of 2009 at 5.4 million units. Combined with our strict cost discipline, this is has more than tripled our operating profit to just over EUR4.8 billion. Profit before tax improved strongly based on the operating profit improvement, but also from a positive financial result.

Our stakes in companies consolidated at equity have together made a strong contribution to the improvement in our financial results. However a significant factor here has also been the change in valuation relating to the put call arrangement we established as part of our comprehensive agreement with Porsche of which more later.

Finally, our continued efficient management of our CapEx and inventory, not to mention our high earnings momentum helped to further improve our Automotive net liquidity to a new record just a fraction below EUR20 billion.

Let me now hand you over to Mr. Klingler, to explain the reasons behind our excellent sales performance.

Christian Klingler

Ladies and gentlemen, also from my side, a very warm welcome to the conference call. This first chart shows the development of the world car market this year by quarter, as well as for the third quarter by month in comparison to the previous year.

In the first three quarters of 2010, the markets record its gross mainly due to a slight recovery of the economic environment and government support, measures in many markets. As many of these measures are expiring due in 2010, the positive effect has already started to fade out. As a result, on a quarter-by-quarter comparison, we see that the global market is losing some of its momentum.

Despite still rather positive gross figures, the improvement is in relative terms only in comparison to the previous year. In 2009, the car market has lost ground significantly as a result of the global crisis as you know. In absolute terms, the markets are stabilizing now on a low level. To avoid the statistical distortion, the comparison to the last so-called normal year of 2007 seems to be to us appropriate. And this shows the next chart.

The positive influences of the government support missions in many markets led to a significant market rebound in the second half of 2009. Hired by support programs from various governments and high incentive levels, the first three quarters of 2010 were slightly below the normal year 2007.

In addition, the global automotive market benefited from favorable economic conditions in China as well as in India. However, our latest forecast suggests a weakening of the global market development in the last quarter of this year. Some of the major European markets continued to struggle with negative effect after the ending of the support missions.

In addition, the Japanese market is expected to lose momentum after its scrapping program ran out in September. To summarize, in 2010, the world car market is said to remain well below its pre-crisis level, despite continuing strong growth in Asia.

In the first three quarters of 2010, our deliveries to customers have shown a positive year-on-year development. The Volkswagen Group outperformed the overall car market in the third quarter of 2010. We continued to gain global market share supported by the developments in China, North America, as well in the major western European countries as Spain and the UK.

The shift in the relative importance of some major markets is set to continue. After a year, that was highly influenced by the scrappage incentives in 2010. The German market is said to lose some of its share of the total western European sales. This puts additional pressure on the performance of the Volkswagen Group as we have an extraordinarily strong market position in Germany as it is well-known.

The next slide, you can see the market performance of the regions around the world in direct comparison to the performance of the Volkswagen Group in the first three quarters of 2010.

First off, South America; the Volkswagen Group has again outperformed the markets in every single region worldwide. Due to a tough competitive situation, new players in the market and the lifecycle effect of some of our models, the Brazilian market increased in relative terms more than our deliveries.

In Western Europe, despite the market contraction of 3.4%, the Volkswagen Group recorded a slightly positive result as we achieved an increase in our deliveries of 0.4%. As already mentioned, some of the major markets in the region still suffer declines after the government pulled out their support measures. This development is currently led by the German market which contracted heavily at 27.5%.

Now, we will take a look at the performance of the individual brands of the Group. In the first three quarters of 2010, all of our volume brands achieved an increase in terms of sales. And for the Group, total deliveries to customers exceeded last year’s level by 12.9%.

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