German sports car manufacturer Porsche AG on Oct. 25 reported double-digit earnings and sales growth for the first nine months of 2012. It is likely to beat financial records it set in 2011.
“We have almost matched the results of the entire previous year after only nine months in 2012. And we definitely expect to outperform the 2011 record year in terms of sales, revenue, and operating profit,” said Porsche CFO Lutz Meschke in a press release.
The Stuttgart-based company sold a total of 103,245 vehicles, 20.2 percent more than last year, generating revenues of $13.15 billion, up 28 percent. Porsche achieved a best-in-class operating margin of 18.5 percent, supporting an earnings increase of 22.9 percent. Competitor Daimler for example, which features the Mercedes brand, reported a much lower margin of 7.8 percent, according to German weekly Manager Magazin.
Larger manufacturers such as Daimler and VW have lower margins because they also sell less expensive car classes, while Porsche is a pure play in the premium segment. The company earned $2.43 billion from operations. For CEO Matthias Müller, the result “is proof for the great appeal of the sports cars and the Porsche brand alike.”
Sales Strong on Across the Globe
Porsche is enjoying success across the globe, with China, where it sold 24,859 vehicles, becoming increasingly important. That market grew 35.4 percent in the first nine months of 2012 compared to the same period in 2011. It also managed to gain 13.2 percent in struggling Europe, where it sold 34,656 cars.
In the United States, dealers cannot satisfy customer demand. “We are not getting enough supply, we could sell a lot more cars if we got more supply,” one Porsche dealer in Manhattan told The Epoch Times.
Porsche produces exclusively in Europe and has to ship cars to the United States, a process that takes longer to react to increases in demand. The dealer, who is selling record numbers, also indicated that because of the slow supply from Europe, pricing remains strong. “The [prices] are holding very strong here, because there is not a lot of inventory around.” When asked about why Porsche was so popular in the United States, he mentioned the exclusivity of the car that is not mass marketed.
The United States is still the individual country with the largest sales of 24,859, but the difference with China has decreased to only 123 cars.
Business Unaffected After Long Takeover Battle
To some, it might seem surprising to see Porsche AG set record after record. After all, it was only Aug. 1 that it became a fully owned subsidiary of Volkswagen AG after five years of takeover battles.
Initially, Porsche tried to buy a majority 75 percent of VW through a holding company, but could not reach the target in time. It had difficulties servicing the debt it raised to finance the takeover in the wake of the 2008 credit crisis. Ultimately, it ended up with 50.74 percent of VW shares, which represents a controlling stake. The Piech and the Porsche family, descendants of the founder Ferdinand Porsche, own the holding company.
In a complete turn of events, Porsche had to find a way out, and there was only one option that made strategic sense: to combine Porsche and VW operations. To reduce debt, the holding company sold Porsche AG—the operating entity that runs the car business—to VW in 2009.
After several years of shareholder lawsuits and trying to find ways to optimize the taxation of the deal, Porsche AG finally ended up with VW this year. Famous Porsche CEO Wendelin Wiedeking, who oversaw the turnaround of the company in 1993, was ousted in 2009 after his unsuccessful attempt to gain control of VW.
Porsche, however, immediately contributed to earnings, leading to favorable reviews by market analysts. Deutsche Bank sums it up in a report: “The decision to buy Porsche might well prove to be the most value-enhancing deal for VW in recent history.”
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