Volkswagen AG (VLKAY.PK) Interim Report January-March 2012 Conference Call April 26, 2012 8:00 am ET Executives Hans Dieter Pötsch – Member, Board of Management, Finance and Controlling Christian Klingler – M ember, Board of Management, Group Sales and Marketing Christine Ritz – Group Head-Investor Relations Analysts Horst Schneider – HSBC Jochen Gehrke – Deutsche Bank Michael Tyndall – Barclays Capital Stuart P. Pearson – Morgan Stanley Arndt Ellinghorst – Credit Suisse Daniel Schwarz – Commerzbank Georges Dieng – Natixis Bernard Donges – JPMorgan Securities Ltd. Adam Hull – WestLB Charles Winston – Redburn Partners Christian Breitsprecher – Macquarie Presentation Operator
The volume increase, which of course includes MAN drove sales revenue up to €47.3 million and operating profit to €3.2 billion, thanks to qualitative growth. Profit before tax increased to €4.3 billion, benefiting from an improved financial result in particular through strong earnings from our equity accounted companies.Automotive net liquidity ended the quarter at close to €16 billion, down just over €1 billion on the year-end, as we invested in our future growth in our car division, in new products and plants, including, of course, MQB and also in trucks with a further increase in our position at MAN. Last week, we announced the takeover of Ducati via Audi AG, subject to the usual approvals of the cartel authorities. Ducati is a perfect fit to Audi with its renowned expertise in low weight and high power outputs, together with impressive margins and significant sales and profit potential. Allow me now to hand you over to Mr. Klingler, who will take you through the sales landscape and our good performance. Mr. Klingler, over to you. Christian Klingler Ladies and gentlemen, a warm welcome to the conference call from me also. This chart shows development of the growth of car market by quarter in comparison to the same quarter of the previous year. In the wake of the Eurozone debt crisis, the economic environment darkened significantly, mainly in Western Europe, but also in markets which depend on exports to the regions. This explains the comparably weak market growth in the last quarter of 2011. With an ongoing strong development in major growth markets such as China, Russia on the one hand, and the North American market picking up on the other, the first quarter of 2012, again, recorded positive growth. The recovery of demand, following last year’s earthquake in Japan also contributed to this global growth of 6.8%.
However, in order to evaluate the relative development of the global market, a comparison to the last normal year of 2007 is still appropriate, which is shown at the next chart.On a global basis, the car market is now comfortably above the pre-crisis level of 2007. However, that is mainly the result of the strong performance of the Chinese market, since then. Excluding China the car market is still below the pre-crisis level as shown in the next chart by the orange line. First, the phase out of government support measures in many markets; then supply disruptions from natural disasters. And finally an increasing difficult economic background in Western Europe, kept the car market I would say of China muted. While the North American car market is growing again, the recovery is still somewhat fragile as the overall economic operates below its potential. With the Eurozone debt crisis still lingering, Western Europe is now in the mild recession putting the car markets under pressure. While some markets, including Germany still show a positive economic growth and a stable car market, started in European countries from Greece to Portugal report significant declines. The recovery in the developed markets will be protracted. A possible further contingent from this current debt crisis and the rising oil price constitute significant risks to the market development. We continue to closely monitor this elevated level of market risks. Some market growth albeit on the somewhat slower pace is continuing to move to BRIC markets, especially in Asia. We expect this favorable development to continue. In spite of the difficult market conditions in the Western Europe, we are confident that in the year 2012 the global car market will have a small growth compared to 2011. Turning now to our performance, the Volkswagen Group continue to outperform over the car market. We again gained global market share in the first quarter of 2012 supported mainly by the group performances in China, the U.S., Russia as well as in Germany. Read the rest of this transcript for free on seekingalpha.com