Porsche `Optimistic' on 2005 as Cayenne Helps Profit

Frankfurt Nov. 15, 2004; Susanna Ray writing for Bloomberg reported that Porsche AG, Europe's most profitable carmaker, said it's ``optimistic'' about continued earnings growth in fiscal 2005 after the first full year of Cayenne sport-utility vehicle sales helped second-half profit rise 6.3 percent.

Net income in the six months ended July 31 rose to 492.4 million euros ($638 million) from 463 million euros a year earlier, according to Bloomberg calculations based on Porsche's 2004 earnings statement to the Frankfurt exchange today. Sales rose 3.6 percent to 3.5 billion euros from 3.38 billion euros.

Chief Executive Officer Wendelin Wiedeking, 52, introduced the Cayenne in 2002 to counter declining demand for older versions of the 911-model and Boxster sports cars in Europe and the U.S. over the past three years. Wiedeking said at a presentation of the new Boxster in October that Stuttgart, Germany-based Porsche may introduce a fourth model.

``The mid-term story is still intact'' as the ``product family is doing quite all right,'' said Stephan Thomas, a fund manager at Frankfurt Trust in Frankfurt, which oversees $16 billion including Porsche shares. ``Porsche, which is more of an assembler now than a manufacturer, is keeping the cost base well in check.''

Currency Questions

At the same time, Thomas said he was ``disappointed'' with earnings and a lack of details on steps Porsche is taking to reduce the effects of the euro's strength against the dollar.

Chief Financial Officer Holger Haerter said on Sept. 22 that the company is now hedged against fluctuations between the dollar and the euro through 2008. The U.S. currency dropped to a record- low $1.3006 per euro on Nov. 10 and was trading at $1.2938 per euro as of 11:08 a.m. today in New York.

``We need more detail on the currency effect but, obviously, being hedged to 2008 is still costly,'' Thomas said.

Shares of Porsche fell 2.35 euros, or 0.5 percent, to 501.51 euros in Frankfurt. The stock is up 6.6 percent this year, valuing the carmaker at 8.78 billion euros.

Porsche plans to raise the common-stock dividend to 3.94 euros a share from 3.34 euros and the preferred-stock dividend to 4 euros from 3.40 euros. Full-year pretax profit rose 17 percent to 1.09 billion euros, the company said.

`Fresh Growth'

The carmaker is ``optimistic'' about ``fresh growth'' in the current fiscal year, as ``the Cayenne's popularity is unbroken,'' Porsche said.

The new version of the flagship 911 model that was introduced in July and the new Boxster that will be introduced this month are likely to provide ``an additional thrust'' to sales, Porsche said.

``It's still not past its prime as a company, with the new model that is likely to be coming,'' said David Haysey, who manages the equivalent of $1.8 billion at Deutsche Bank in London, including Porsche shares. ``With the new 911 and the Cayenne, Porsche's shown that they can make the formula work over and over again.

``They've proven themselves to be a management team and franchise to back,'' Haysey said.

Second-half figures were derived by subtracting first-half from fiscal 2004 figures released by Porsche. Net income in the 12 months ended July 31 rose to 612 million euros from 565 million euros a year earlier, Porsche said. Profit was less than the 642 million-euro estimate of eight analysts surveyed by Bloomberg News.

Porsche said on Sept. 22 that full-year revenue rose 14 percent to 6.35 billion euros as unit sales rose 15 percent to 76,827 cars and sport-utility vehicles. The company said at the time that pretax profit exceeded 1 billion euros.

Almost half of Porsche's vehicle sales last year were in the U.S. The company is aiming for another year of record unit sales and revenue after beating its 75,000 vehicle full-year target, Harro Harmel, Porsche's personnel chief, said in September.