Porsche sees record profit as Cayenne sells out

STUTTGART, Germany, Dec 4, 2002; Nick Tattersall writing for Reuters reports that German sportscar maker Porsche AG (Frankfurt:PSHG_p.F - News) said on Wednesday it was set for a ninth consecutive year of record profit after selling out its new Cayenne model even before the sports utility vehicle reaches dealers.

The company said it had already taken firm orders for all of its anticipated annual production of 25,000 Cayennes, which go to dealers in Germany this week. A further 100,000 potential buyers are waiting to test drive the car.

The new model is the first foray into the off-road market for Porsche, which previously built only sportscars.

"The Cayenne is the biggest challenge the company has ever faced throughout its entire history," said Porsche Chief Executive Wendelin Wiedeking at the firm's annual news conference.

"Judging by everything we know... we have already sold out our anticipated annual production of 25,000 units."

Porsche's hitherto recession-resistant strategy of selling just two types of very fast cars to a small number of people has helped it post record profits for eight consecutive years.

It is now hoping the Cayenne, which weighs more than two tonnes but can hit 266 kilometres an hour in its most powerful version, will lift unit sales by 50 percent.

Wiedeking said Porsche, the world's most profitable car maker, expected to beat last year's sales and earnings again in the year to the end of July 2003.

It said in October pre-tax profit in its last business year had climbed 40 percent to 828.9 million euros ($828.1 million) and that there was better to follow.

PRODUCTION RISE?

Wiedeking hinted Porsche may increase production of the Cayenne, which will cost between 60,000 and 100,000 euros, although capacity would always remain just below demand.

"The bottleneck we might have is with suppliers, but you can rest assured we could accommodate a few more Cayennes if we need to," he said.

Porsche's finance director, Holger Haerter, told Reuters the order intake for the Cayenne suggested more buyers than expected were plumping for the higher-margin Turbo version, although he declined to comment on how profitable the model range would be.

"What we are seeing at the moment is that the mix is a little bit above our expectations, going more in the direction of 30 percent for the Cayenne Turbo," Haerter said.

Porsche shares, which have risen eight percent this year compared with a 19 percent fall on the DJ Stoxx European automotive index (Zurich:^SXAP - News), edged up 0.57 percent at 462.60 euros on Wednesday. The European sector dropped 0.21 percent.

"With the Cayenne everything is clearly going as planned. And the trend towards a higher-value model mix for the 911 especially is stabilising," said HypoVereinsbank analyst Georg Stuerzer.

WAR WORRIES

Wiedeking said it was difficult to provide a more precise forecast for the current business year, noting the possible economic impact of military action in Iraq and the fragile state of global stock markets.

"The geopolitical and economic distortions caused by an attack against Iraq might well be enormous. And the development of the stock exchange remains a substantial risk," he said.

The company said earlier it had entered its current year with full order books for its sports cars. It posted a slight rise in unit sales from August through November and said revenues had risen 3.1 percent to 1.31 billion euros.

Porsche said it had sold 14,390 of its entry-level Boxsters and high-margin 911s as well as 327 Cayennes to dealer showrooms in the period, while output rose 3.9 percent to 16,928 units.

Sales of the Boxster roadster were expected to remain steady in the current year, buoyed by a recent facelift, while sales of the classic 911 would fall from the record levels of 2001/02.

The financial services business, which added 240 million euros to group revenues and 19.8 million to net profit in the last business year, would see stellar growth.

"We expect 60 to 70 percent growth in the next two to three years in financial services," Haerter said.

Porsche said late on Tuesday a weak U.S. economy was taking a toll on its North American market, where sales fell nine percent in November, weighed on by a 21 percent drop in sales of the Boxster, a small roadster launched around five years ago.

But the company remained optimistic it would meet its targets in the United States, where it sells over half its cars.

"With the Cayenne we have a very good opportunity in the U.S. There is enough money around, and especially for the Cayenne Turbo there is no competition at the moment," Haerter said.