Porsche Group Shareholders Letter for the First Six Months of the Fiscal Year

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Rodger Rogers
5 years ago
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1 Porsche Group Shareholders Letter for the First Six Months of the Fiscal Year

2 Dear Shareholders, Porsche s decision to acquire a holding in Volkswagen was a major topic of discussion during the first half of Porsche s 2005/06 fiscal year (August 1, 2005 to January 31, 2006). This step caused a sensation both among our shareholders and the general public. Meanwhile Porsche holds a percent stake of voting rights in the Wolfsburg based group, acquired through an investment of around three billion euros. Another in-depth presentation of the reasons for the investment in VW at our annual general meeting in Stuttgart a couple of weeks ago was greatly applauded. From an industrial perspective, the logic behind our investment in VW is that the collaboration of the two companies in core segments will generate substantial savings on both sides. At Porsche, we expect the annual overall benefit to be at least a three digits million euros figure. We believe the greatest synergy potential to lie in the fields of technology and development. In addition to collaborating on joint projects at the moment these mainly include the successor of the Cayenne and Touareg and the development of a hybrid power unit we want to use our presence in the VW Supervisory Board to support the Wolfsburg based group with the reorganization program already initiated there. In the mid-term we are therefore expecting our VW investment to increase in value which should also have a knock-on effect on the development of the Porsche share. Sales revenues and unit sales up again Like the consolidated financial statements of Porsche AG for the 2004/05 fiscal year, this shareholders letter has also been prepared in accordance with International Financial Reporting Standards (IFRS); the prior-year figures have been adjusted accordingly. Since the sale of CTS Fahrzeug-Dachsysteme GmbH, Bietigheim-Bissingen, did not take place until February 2006, the manufacturer of roof systems for the automotive industry is still included in the figures of the first six months. In the first half of the current fiscal year, the Porsche Group has remained on track for success, despite difficulties on some sales markets. The current generations of sports cars once again turned out to be the growth drivers. Thanks to the increase in unit sales, aggregate group sales rose by 15.5 percent to 3.26 billion euros. A total of 42,230 vehicles were sold, that is 18.2 percent more than in the prior-year period. The 911 accounted for 14,981 vehicles (up by 21.7 percent), with 5,640 of the new all-wheel drive models included in this total. Growth in the Boxster series was even more dynamic. Unit sales, including Cayman S, rose by percent to 10,017 vehicles. The new mid-engined coupé alone accounted for 4,329 units despite the fact that it was only launched onto the international markets in November 2005 to great acclaim both among customers and in the specialized press. Sales of the Carrera GT, the last of which will roll off the production line in April 2006, totaled 260 units (prior-year period: 284 vehicles).

3 In the first half of the current fiscal year, the Cayenne was again the best selling Porsche model with unit sales of 16,972. At the same time, however, unit sales of the sport utility vehicle dropped by 12.1 percent. This is mainly due to the fact that the Cayenne has been on the market for four years now and Porsche unlike most of its competitors does not offer any price concessions so as not to jeopardize the residual value. North America, where unit sales were up 23.3 percent to 18,030 units, is still the largest single market. In the export markets outside North America the number of vehicles sold rose by 21.8 percent to 18,711. In Germany, on the other hand, where the economic climate remains difficult, unit sales were down 4.6 percent to 5,489 units. Profits up again In the first half of the current fiscal year the earnings power of the Porsche Group was unbroken. Despite the expenditure involved in the development of the Panamera Porsche s fourth model range the pre-tax profit rose by 12.9 percent to million euros. Profit after tax rose to million euros, an increase of 14.5 percent compared to the same period the year before. New jobs created In the reporting period, Porsche again created new jobs. In light of the persistent negative trend on the labor market in Germany this is not a matter of course. The group headcount rose by 1.3 percent to 11,910 persons. Most new hires were needed in the service and sales functions. High capital expenditures Capital expenditures in the Porsche Group rose by 4.9 percent to million euros. Of this total, an amount of million euros was devoted to the financial services companies. Otherwise, spending was below the prior-year level at million and mainly concerned the further optimization of production processes in the Porsche plants in Zuffenhausen and Leipzig, the Porsche Museum currently under construction at the head office in Zuffenhausen as well as the preparation of future model projects. Bonds improve liquidity The company s conservative financial policy sets attaches great importance to having a comfortable liquidity cushion at all times combined with ideally structured liquidity. After the purchase of the VW shares, for which much of the existing liquidity was used up, January 2006 saw the issue of two new bonds by Porsche International Financing plc, the Dublin/Ireland-based financing subsidiary. The demand from investors for the two bonds was overwhelming so that they were oversubscribed several times. One of the bonds is a euro bond of two billion euros, split into two tranches of one billion each with varying terms of five and ten years. The five-year term bears an interest coupon of 3.5 percent p.a., while the ten-year term has an interest coupon of percent. In addition, a perpetual hybrid bond denominated in US dollars of one billion US dollars with an interest rate of 7.2 percent p.a. was issued. The euro bond is listed on the stock exchanges in Dublin and Stuttgart, while the US dollar bond is only listed on the Dublin stock exchange.

4 Outlook The upward economic trend observed worldwide cannot belie the weak demand within the euro zone. Uncertainty on the labor market and higher energy prices are two of the main factors inhibiting private consumption. As a result, vehicle sales on many markets are still disappointing. Nevertheless, Porsche will sell more vehicles in the current fiscal year than the year before. For the entire fiscal year 2005/06 we anticipate unit sales of considerably more than 90,000 vehicles, sales growth and a persistently high earnings level. Again in the current fiscal year, the lynchpin of success will be Porsche s attractive range of models. The new 911 Turbo and also the 911 GT3, both of which will be launched before the end of this fiscal year, will underline the sporty claim of the 911 series and further enhance the appeal of the brand. The success of the Boxster series will be substantiated by the Cayman S that was introduced in November Yet, even in the sport utility vehicle segment, Porsche has set an example with the Cayenne Turbo S (see photos). The new top model of the Cayenne model program, which has been ready for delivery since late January, is not only the strongest series vehicle ever built by Porsche after the Carrera GT, but also the highest performing sport utility vehicle of them all. The vehicle will not only give the Cayenne series a boost, it will also give additional weight to the sporty focus of the Porsche brand a brand whose success story looks set to continue beyond the current fiscal year thanks to the appeal of the products. Our involvement in Volkswagen will make an important contribution here because it will help us to shape our future successfully and self-reliantly. With our very best regards, Dr. Wendelin Wiedeking Chief Executive Officer Holger P. Härter Chief Financial Officer Dr. Ing. h.c. F. Porsche Aktiengesellschaft Stuttgart, February 2006

5 The Porsche Group in Figures (according to IFRS) First half of First half of Change in percent Turnover Billion Euros Sales Vehicles 42,230 35, Germany Vehicles 5,489 5, North America Vehicles 18,030 14, Other Exports Vehicles 18,711 15, Production Vehicles 46,986 38, of which 911s Vehicles 15,208 12, of which Boxsters/Cayman Vehicles 12,971 6, of which Boxsters/Cayman built in Finland Vehicles 12,936 6, of which Cayenne Vehicles 18,586 19, of which Carrera GTs Vehicles Workforce on January 31 11,910 11, Investments *) Million Euros Pre-tax result Million Euros Result after tax Million Euros *) Without investments in financial assets

6 Dr.Ing.h.c.F.Porsche Aktiengesellschaft D Stuttgart Telephone +49(0)

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