By DAVID McHUGH, Associated Press
FRANKFURT, Germany (AP) — Stronger demand from North America and the world's developing markets helped German automaker Volkswagen record an 18 percent jump in second-quarter earnings.
Net profit for the April-June period increased to €5.64 billion ($6.84 billion) from €4.78 billion a year ago. Revenues increased 19 percent to €48.1 billion.
The Wolfsburg-based manufacturer said Thursday that that worldwide demand for cars increased in the second quarter in the US, China, Russia and India, and would rise again in the second half of the year — but at a slower pace.
Volkswagen warned the car market would shrink further in western Europe, where economies are slowing due to spending cutbacks and consumer worries due to a crisis over too much government debt. Nonethless, it reaffirmed its forecast for this year's earnings.
Sales and marketing chief Christian Klingler said European auto markets were under pressure, but that Volkswagen was doing better than the overall market. Its European sales fell 1.5 percent in a market that shrank 6.8 percent.
Government measures to reduce public debt, such as the increase in value-added tax paid by Spaniards on purchases, was weighing on growth, especially for mass-market cars in southern Europe. France, Italy, Portugal and Greece have all been hard hit.
"The situation has placed the whole of the motor industry under considerable pressure," Klingler said in a conference call with analysts.
Volkswagen has outperformed other European mass-market carmakers, which are struggling with weak pricing and markets depressed by slow growth and high unemployment in countries such as Spain and Italy. It enjoys a strong business in China and reaps higher margins from its Audi luxury brand.
The net profit figure easily beat analyst estimates compiled by FactSet of €2.79 billion. Operating earnings, however, increased by a smaller 3.4 percent to €3.28 billion and fell short of expectations for €3.29 billion. Operating earnings exclude financial items such as interest and taxes and are sometimes considered to show a clearer picture of how a company's basic business is developing.
The company said it would meet its goal of operating earnings this year equal to last year's €11.3 billion. The company ran ahead of pace in the first half, at €6.5 billion, but the company says that the third quarter — typically a weaker one for car companies — would see earnings held back by model changeovers.
Slower increases in operating earnings and the caution regarding Europe helped weigh on shares, which fell 4.4 percent to €123.00 in afternoon trading in Europe.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.