Porsche's second-half profit almost doubles; shares soar

STUTTGART, Germany October 14, 2002, Bret Okeson writing fpr Bloomberg reported that Porsche AG's second-half profit rose a greater-than-expected 95 percent as the German sports-car maker benefited from demand for its 911 model and a lower tax rate. The shares rose as much as 17 percent.

Net income rose to 372.6 million euros ($367 million) in the six months ended July 31 from 191 million euros a year ago, Porsche indicated in a statement to the Frankfurt stock exchange. Sales rose 11 percent to 3.02 billion euros. The company also expects profit to increase this fiscal year.

Chief Executive Wendelin Wiedeking has led Porsche to eight years of successive profit increases, introducing new versions of the 911 model as well as the lower-priced Boxster. He aims to increase unit sales by 50 percent with the Cayenne sports-utility vehicle, the first vehicle other than a sports car Porsche has made since shortly after World War II, when it built tractors.

"These figures are better than I expected," said Pia Hellbach, who helps manage 30 billion euros at Union Invest in Frankfurt and owns 80,000 Porsche shares. "I'm still cautious about the company until I see how the Cayenne does."

Luxury carmakers like Porsche and Bayerische Motoren Werke AG have increased sales and profit even as the global car market shrinks since wealthy customers are less vulnerable to economic declines.

The company's shares rose as much as 64.40 euros to 451 euros, the biggest increase in at least 13 years. They traded up 16 percent at 450 euros at 5:37 p.m. in Frankfurt.

Bloomberg News calculated second-half figures by subtracting first-half results from full-year figures.

Increased demand for the company's 911 model range has more than offset falling sales of the lower-priced Boxster model in the U.S. The company has added extra shifts at its factory outside Stuttgart to increase production of the 911, which has higher profit margins.

"These are brilliant figures," said Michael Raab, an analyst at Bank Sal Oppenheim. "In spite of being burdened by costs for the launch of the Cayenne, the figures are amazing." He rates the company "neutral" and is considering upgrading his rating.

The company will begin selling the Cayenne later this year. It predicts that earnings and sales will rise on demand for the model. The Cayenne is designed to lure buyers from Bayerische Motoren Werke AG's X5, DaimlerChrysler AG's Mercedes-Benz M-Class and Ford Motor Co.'s new Land Rover sport-utilities.

Full-year net income rose 71 percent to 462 million euros from 271 million euros in the year earlier period, Porsche said. Full-year pretax profit rose 40 percent to 829 million euros. Sales rose 10 percent to 4.8 billion euros in the fiscal year ended July 31.

Analysts surveyed by Bloomberg News expected full-year net income to rise 33 percent to 360 million euros, while pretax profit was forecast to rise 8 percent and sales to grow 5.2 percent.

The company said a German federal tax cut helped increase net income, while hedging against changes in the exchange rate between the U.S. dollar and the euro also helped. Porsche sells about 40 percent of its cars in the U.S., its largest market.

"The company harvested the fruits of its successful currency hedging policy," the company said in a faxed statement.

Porsche is building the Cayenne in cooperation with Volkswagen AG, Europe's largest carmaker. To cut costs, Porsche is buying the metal frame of the Cayenne from Volkswagen, which is bringing out its own sport-utility vehicle called the Touareg.

Porsche unit sales fell 0.6 percent to 54,234 sports cars, as Boxster sales declined.