IHS Global Insight Perspective | |
Significance | Porsche continues to mount a strong recovery in terms of the sales and financial performance of its core business, recording a sevenfold rise in operating profit during the first three months of its financial year to 395 million euro. |
Implications | The company has benefited from the recovery in the global premium passenger car market in 2010, but the principal factor behind the recovery has been the launch of the second generation version of its best-selling Cayenne SUV model earlier this year. This has helped sales rise by 86.4% year-on-year (y/y) for the period to 21,218 units. |
Outlook | Porsche is expecting a double-digit return on sales for what will effectively be a five-month financial year ahead of Porsche aligning its financial reporting to the calendar year in line with the VW Group. Porsche has expressed its confidence in its financial recovery by paying out a bonus of 2,100 euro to all workers that joined the company prior to August 2009. |
Porsche is mounting a strong recovery in terms of the sales and financial performance of its core carmaking business following years of volatile financial performance resulting from share gains and losses which resulted in its ultimately abortive takeover attempt of the Volkswagen (VW) Group. According to a company press release, Porsche's operating profit in the first quarter of its 2010/2011 financial year (FY) between August and October increased more than sevenfold to 395 million euro (US$528 million) in comparison to the figure of just 52 million euro recorded in 2009. Revenue for the period rose by 80.3% year-on-year (y/y) with sales of 2.06 billion euro. Porsche's financial year has traditionally run from July to August, making it unique in the European automotive industry. However, the firm will align its financial reporting to the calendar year from 2011 to further integrate its operations with the Volkswagen (VW) Group with which is looking to merge following the collapse of its hostile takeover bid for Europe's largest carmaker last year. As a result, the current Porsche FY will be only a five-month period which will end on 31 December. Commenting about the company's performance during the period, newly appointed chief executive Matthias Mueller said, "We can be satisfied with the key indicators of the first three months. Porsche AG is continuing on a profitable growth course." Mueller was also upbeat on the continuing growth prospects for the company. He added, "Due to the order intake worldwide in the past few months, we expect a good double-digit return on sales in the short fiscal year from August to December 2010".
The strong operating result for the first quarter of the FY was backed by a corresponding uplift in global sales as the premium passenger car market recovered and the company launched its second-generation Cayenne SUV in May, while the Panamera has also continued to perform well since its launch at the end of 2010. As a result, sales volumes in the August-October period increased by 86.4% y/y to 21,218 units, although this comparison was against a particularly weak prior-year period. The high demand for the Cayenne saw the model contribute nearly half of this combined total with 10,292 units sold, a 151% y/y rise in comparison to what the previous generation Cayenne sold as it neared the end of its model cycle. The new model was launched onto the market in May of this year. The Panamera saw its sales volumes increase by 94% y/y to 5,778 units. Again it should be noted that this is not a true like-for-like comparison as the Panamera was not available on all markets worldwide in the prior-year quarter and the six-cylinder model was not delivered to dealers until May 2010. Sales momentum of Porsche's two core sports car lines the 911 and the Boxster/Cayman is slowing as a result of model cycle trends, but the very low base comparison with last year saw the 911's sales rise by 20.4% y/y to 3,130 units, while the Boxster series generated sales of 2,018 units, an increase of 17.5% y/y. Of these, 1,089 units were Boxsters and 929 units were Caymans.
In Europe, unit sales increased by 63% y/y to 7,082 vehicles; 2,318 units of this total were attributable to the German market, a rise of 50.1% y/y. The brand experienced an even stronger rebound in America, where sales rose by 82% y/y to 7,268 units. In Asia and the rest of the world, unit sales grew by 126% to 6,868 vehicles. This development was driven by strong growth in China, which has generated massive exponential growth among the more volume premium brands in 2010, such as Audi, BMW and Mercedes-Benz. Porsche's headcount grew during the period by 2.5% to 13,043 employees, as it has taken on extra workers in its R&D departments and Cayenne production lines. In addition, it stated that at the end of October, every employee who had joined Porsche AG before 1 August 2009 was paid a voluntary special payment of 2,100 euro for the past fiscal year 2009/10.
Outlook and Implications
Porsche is keen to present itself as getting back to its core business as a car company following an extremely volatile period when the audacious hostile takeover bid to gain control of the VW Group saw the firm's holding company, Porsche Automobil Holding SE, generate massive fluctuations in profit and loss as a result of gains and losses in VW shares and cash-settled options that it acquired between 2005 and 2009. The company's latest first-quarter financial year results present a picture of a company that is getting back to its core business and which is benefiting strongly from the renewal of its best-selling model and the fact that the global premium passenger car market is recovering, fuelled by growth in China and the United States, and by the return of consumer confidence and lending to those with sufficient collateral. The forecast of a double-digit return on sales for what is effectively a shortened reporting period, before Porsche aligns with calendar-year financial reporting, shows that the company is returning to solid profitability from its car business, which will please VW's management and the new VW-appointed chief executive Matthias Mueller. This has been helped in no small measure by the launch of the new Cayenne in May. The Cayenne has received plaudits for its styling, build quality and on-road ability but it faces an increasingly competitive environment on the luxury SUV sector, with the potential for further competition on the form of a Maserati-badged SUV from the Fiat Group. However, the company's financial performance should continue to improve, provided there are no further shocks in the global macroeconomic environment. However, this is less than certain given the current worries over sovereign debt in the Eurozone and the still weak recovery in the United States. Porsche appears less reliant on China than the volume premium brands such as Audi, BMW and Mercedes-Benz to generate sales volume growth and this may not be such a bad thing as the massive exponential growth in the Chinese premium passenger car market cannot continue at the current rate indefinitely. IHS Automotive forecasts a steady growth trajectory in terms of sales for Porsche over the coming years, with volumes forecast to increase to just under 97,000 units for the 2010 calendar year, up from the 78,607 units posted in 2009, before climbing further to just under 115,000 units in 2011.