Volkswagen Gives Cautious Outlook; Profit Tumbles

By William BostonDow Jones Newswires

Volkswagen AG, Europe's largest automotive group, Thursday posted a 58% drop in net profit for 2013 and issued a cautious outlook for the new business year amid a sluggish recovery in global car demand and currency risks from emerging markets.

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The Wolfsburg, Germany-based auto group, which makes popular brands such as Volkswagen, Audi, Porsche and Bentley, said momentum in global car markets would remain weak this year and that there are "big risks" for the global economy, especially from "increasing headwinds" in some emerging markets.

"The automotive year 2013 was especially for European car makers extremely challenging," said Martin Winterkorn, VW's chief executive. "In light of the uncertainties our forecast for 2014 is comparatively cautious."

Volkswagen's net profit was EUR9 billion ($12.5 billion) last year, down from EUR21.7 billion the year before. Sales rose 2.2% to EUR197 billion, driven by a sharp increase in sales of Porsche sports cars, a moderate pickup in Europe and strong growth in China. Volkswagen sales in China crossed the three million vehicles threshold for the first time last year.

"China remains the growth engine--for us and the entire industry," said Mr. Winterkorn.

Volkswagen brands are expected to launch more than 100 new models this year, said Mr. Winterkorn, as part of a drive to sell more than 10 million vehicles a year by 2018. The company is investing around EUR100 billion by 2018 in new plants, products and technology to boost growth.

"Chances are good that we will exceed the 10-million-mark already this year, four years earlier than originally planned," said Mr. Winterkorn.

In light of uncertainties about the global economic recovery and currency risks, Volkswagen forecasts a moderate increase in deliveries this year and a rise of up to 3% in sales. The company expects operating profit margins of between 5.5% and 6.5%, only slightly higher than 5.9% in 2013.