Porsche to sell at least 80,000 cars in fiscal year 2005

STUTTGART, Germany, Jan 28, 2005; Christiaan Hetzner writing for Reuters reported that Porsche forecast its vehicle sales would rise to at least 80,000 in its fiscal year to July 2005, buoyed by new generations of its iconic 911 sports coupe and entry-level Boxster roadster.

The news disappointed some bullish investors and analysts, and weighed on its share price, although stronger than expected sales of its pricier models boosted its first-half sales, revenue and earnings.

Headline earnings before taxes increased 6.5 percent to 225 million euros ($293 million) for the six months to end-January, while net income climbed 4.5 percent to 125 million, exactly in line with consensus estimates.

Porsche, which has the highest profit margins in the global auto industry, reiterated it expected a continued high level of profit and revenue growth for the full year.

In the previous year, Porsche boosted sales 15 percent to 76,827 vehicles, generating revenue of 6.36 billion euros and pretax profit of 1.09 billion.

The vehicle sales forecast, however, was lower than some had been looking for.

"I expect the share will come under some pressure today. The outlook is rather disappointing. Many people in the market had hoped Porsche would guide for car sales of 85,000," said Landesbank Rheinland-Pfalz analyst Michael Punzet.

Porsche shares fell 2.3 percent to 500.00 euros by 1337 GMT, underperforming a slight 0.2 percent drop in the DJ Stoxx European autos index .

Analysts focus more on the sales forecast than on interim earnings due to Porsche's conservative habit of front-loading all full-year provisions in the first half.

"The tax rate of 44.4 percent signals that Porsche still kept its very conservative accounting in the first half," HVB analyst Georg Stuerzer wrote to clients on Friday.

NEW MODEL YET TO BE DECIDED

Chief Executive Wendelin Wiedeking remained tight-lipped about a possible fourth model line -- the subject of intense speculation -- reiterating that a decision whether to proceed would be taken by July.

"If we do say yes, then it's clear we will have even fewer friends in the industry," the Porsche CEO told shareholders. "How would it look? Well, it will have four wheels, and that's all I'll say for now."

Despite the relaunch of both the Boxster and the 911, some analysts believe Porsche needs a fourth model line to justify its equity story as a growth stock.

Even without one, however, Wiedeking expects vehicle sales could still rise to an annual 100,000 vehicles in the next two to three years with its big push into new markets such as Russia, China and India.

In the first six months, revenue rose 3.4 percent to 2.95 billion euros on the back of a stronger 9.7 percent rise in sales to 35,660 vehicles.

Porsche said preliminary first-half data showed a 19.5 percent rise in sales of its high-margin 911 model to 12,300 units, while sales of its offroader Cayenne rose 13.3 percent to 19,200.

Boxster sales dropped 25.9 percent to 3,900 units, a dramatic improvement from the 46.7 percent plunge in the first four months due to its expected relaunch at the end of November.

"The model mix was slightly better than we had anticipated, with more sales of 911 and Cayenne versus our estimate and less Boxster," Morgan Stanley wrote in a research note.

Porsche shares have long been valued at a significant premium to other automakers, reflecting Wiedeking's track record of boosting profits for 10 years in a row, but multiples have steadily declined, mainly due to fears that the strong euro could severely dent profits.