Audi AG expects another record year as car buyers snap up new models such as the Q7 offroader and the TT Coupe roadster, Volkswagen's (VOWG.DE: Quote, Profile, Research) premium unit said on Wednesday, but it gave no profit target.
"We want to grow further, and we'll succeed as far as vehicle sales and revenue, and we hope that we will also succeed in terms of earnings," Audi AG (NSUG.DE: Quote, Profile, Research) Chief Financial Officer Rupert Stadler told Reuters in an interview.
VW needs Audi's good performance to continue since the brand with the four interlocked rings contributes the bulk of profits at the group.
Shares in VW rose 1.3 percent to 58.99 euros by 1413 GMT, the top gainer on the DJ Stoxx European autos index <.SXAP>.
"Audi is in great shape. It's been an underleveraged asset the past 10 years, but under current management, they are doing a great job of addressing the deficits versus rivals Mercedes and BMW," Sanford C. Bernstein analyst Stephen Cheetham said.
With Audi's dollar exposure nearly fully hedged this year and roughly 50 percent hedged for 2007, adverse currency effects that totalled some 800 million euros ($951.9 million) over the past three years do not present a worry.
"A dollar rate of 1.30 to the euro in 2006 would not worry me at all," Stadler said.
Audi's single largest export market is the United States, and it also does business in dollars in South America and Russia, among other areas.
Its Audi of America unit aims to break even this year, meaning a performance swing in the "high double-digit millions of euros", Stadler said.
Although he expects Audi brand deliveries to grow by some 6 percent this year, Stadler said the model offensive would bring not only gross earnings contributions but also amortisation writedowns from capitalised development costs.
While Volkswagen's core VW brand is expected to have only broken even last year, Audi's pretax profits grew by 14.6 percent to 1.31 billion euros, translating to a profit margin of 4.9 percent before tax versus 4.7 percent in 2004.
By comparison Mercedes Car Group (DCXGn.DE: Quote, Profile, Research) swung to a 2005 operating loss of 505 million euros, hit by restructuring costs. BMW (BMWG.DE: Quote, Profile, Research), which has yet to report figures, had a group pretax margin of 6.9 percent in the first nine months of 2005.
Q7 IN DEMAND
Audi Chief Executive Martin Winterkorn reaffirmed at the company's annual news conference he aimed to raise vehicle sales to 1 million as early as 2008 and to at least 1.4 million by 2015.
"No brand will grow like Audi in the near future," Winterkorn said. "We are planning to sell significantly more vehicles in 2006 than in the record year 2005."
One model expected to contribute significantly to its growth strategy is the new Audi Q7 all-wheel-drive SUV that boasts more cabin space than Volkswagen's full-size Touareg offroader.
Audi said it had received more than 13,000 advance orders for the Q7 in Europe ahead of its market launch on March 10.
The company aims for an 11th consecutive record year of deliveries to customers in 2006 after selling 6.4 percent more cars to reach a total of 829,100 cars last year.
Audi also pledged to bring its struggling sister brand, SEAT, back from the red by rolling out new models and derivatives. SEAT is not part of Audi AG, but it comes under the Audi Brand Group headed by Winterkorn.
"We (SEAT) will make an operating profit again in the foreseeable future and contribute clearly positive earnings at the latest in 2008," Andreas Schleef, Audi management board member and SEAT chief told reporters at a news conference.
Due mainly to a one-off tax effect that flattered 2004 earnings, Audi's remaining net profit sank by almost a quarter to 362 million euros after it transferred 462 million in profits to parent Volkswagen last year.
Audi did not provide an earnings forecast but did say net liquidity at the end of 2006 is expected to surpass last year's 3.39 billion euros despite higher cash outflows for investments.
Its return on investment rose to 9.7 percent in 2005 from 8.7 percent the year before.
"This puts us well on the way to achieving our long-term target of a return on investment of more than 10 percent in the very near future," Stadler told reporters.
Source: Reuters