Volkswagen Group again generates record results in 2011

The Volkswagen Group significantly increased sales revenue and operating profit in fiscal year 2011, once again generating record results. Net liquidity remained at a high level at the end of 2011 even after equity investments.

Following the consolidation of MAN SE on November 9, 2011, the Volkswagen Group’s revised segment reporting in compliance with IFRS 8 comprises the four reportable segments Passenger Cars and Light Commercial Vehicles, Trucks and Buses, Power Engineering, and Financial Services, in line with the Group’s internal reporting and management.

At Volkswagen, segment profit or loss is measured on the basis of operating profit or loss.

The reconciliation contains activities and other operations that by definition do not constitute segments. It also includes the unallocated Group financing activities. Consolidation adjustments between the segments (including the holding company functions) are also contained in the reconciliation. The purchase prices for Scania, MAN and Porsche Holding Salzburg are allocated in line with their accounting treatment in the segments.

Following the consolidation of MAN SE, the Automotive Division discussed in the course of this chapter comprises the Passenger Cars and Light Commercial Vehicles, Trucks and Buses and Power Engineering segments, as well as the figures from the reconciliation. We combine the Passenger Cars and Light Commercial Vehicles segment and the reconciliation into the Passenger Cars and Light Commercial Vehicles Business Area. We report on the Trucks and Buses and Power Engineering segments under the Trucks and Buses, Power Engineering Business Area. The Financial Services Division corresponds to the Financial Services segment.

The activities of the Passenger Cars and Light Commercial Vehicles segment cover the development of vehicles and engines, the production and sale of passenger cars and light commercial vehicles, and the genuine parts business. This segment is composed of the Volkswagen Group’s individual passenger car brands and light commercial vehicles on a consolidated basis.

The Trucks and Buses segment primarily comprises the development, production and sale of trucks and buses from the Scania and MAN brands, the corresponding genuine parts business and related services.

The Power Engineering segment combines the large-bore diesel engines, turbomachinery, special gear units, propulsion components and testing systems businesses.

The activities of the Financial Services segment comprise dealer and customer financing, leasing, banking and insurance activities, as well as fleet management.

RESULTS OF OPERATIONS OF THE GROUP

In fiscal year 2011, the Volkswagen Group’s sales revenue substantially exceeded the prior-year figure, rising by 25.6% to €159.3 billion primarily as a result of higher volumes. The largest proportion of sales revenue, at 78.3% (77.4%), was generated outside Germany. Volume-related factors and improved product costs saw gross profit grow to €28.0 billion. As the cost of sales rose by a slower 24.6%, the gross margin improved from 16.9% to 17.6%. Operating profit was significantly higher than in the previous year at €11.3 billion (€7.1 billion). At 7.1% (5.6%) the operating return on sales exceeded the prior-year level.

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KEY FIGURES BY SEGMENT

 

 

 

 

€ million

 

Passenger Cars and Light Commercial Vehicles

 

Trucks and Buses

 

Power Engineering

 

Financial Services

 

Total
segments

 

Reconciliation

 

Volkswagen Group

Sales revenue

 

138,692

 

11,723

 

662

 

17,244

 

168,322

 

–8,985

 

159,337

Segment profit or loss (operating profit or loss)

 

9,886

 

937

 

–6

 

1,298

 

12,115

 

–844

 

11,271

as % of sales revenue

 

7.1

 

8.0

 

–1.0

 

7.5

 

 

 

 

 

7.1

CONSOLIDATED PROFIT

The Volkswagen Group once again posted record results in fiscal year 2011, more than doubling profit before tax to €18.9 billion (€9.0 billion). The return on sales before tax improved from 7.1% in the previous year to 11.9%. At €15.8 billion, the Volkswagen Group’s profit after tax was €8.6 billion higher year-on-year. The tax rate was 16.5%; effects from the remeasurement of the options relating to Porsche Zwischenholding GmbH have no impact on the tax expense.

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INCOME STATEMENT BY DIVISION

 

 

 

 

 

 

Volkswagen Group

 

Automotive*

 

Financial Services

€ million

 

2011

 

2010

 

2011

 

2010

 

2011

 

2010

*

Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.

Sales revenue

 

159,337

 

126,875

 

142,092

 

112,806

 

17,244

 

14,069

Cost of sales

 

–131,371

 

–105,431

 

–117,853

 

–94,746

 

–13,518

 

–10,685

Gross profit

 

27,965

 

21,444

 

24,239

 

18,060

 

3,727

 

3,384

Distribution expenses

 

–14,582

 

–12,213

 

–13,808

 

–11,442

 

–774

 

–770

Administrative expenses

 

–4,384

 

–3,287

 

–3,562

 

–2,659

 

–822

 

–628

Net other operating income

 

2,271

 

1,197

 

3,104

 

2,231

 

–832

 

–1,034

Operating profit

 

11,271

 

7,141

 

9,973

 

6,189

 

1,298

 

952

Share of profits and losses of equity-accounted investments

 

2,174

 

1,944

 

2,041

 

1,819

 

133

 

125

Other financial result

 

5,481

 

–91

 

5,510

 

–131

 

–30

 

39

Financial result

 

7,655

 

1,852

 

7,551

 

1,689

 

104

 

164

Profit before tax

 

18,926

 

8,994

 

17,524

 

7,878

 

1,402

 

1,116

Income tax expense

 

–3,126

 

–1,767

 

–2,702

 

–1,456

 

–424

 

–312

Profit after tax

 

15,799

 

7,226

 

14,822

 

6,422

 

978

 

804

Noncontrolling interests

 

391

 

392

 

370

 

384

 

20

 

8

Profit attributable to shareholders of Volkswagen AG

 

15,409

 

6,835

 

14,451

 

6,038

 

957

 

797

RESULTS OF OPERATIONS IN THE AUTOMOTIVE DIVISION

The Automotive Division generated sales revenue of €142.1 billion in 2011, up 26.0% on the prior-year figure. In addition to increased volumes, the increase was the result of model and country mix improvements and the initial consolidation of subsidiaries, and in particular of the automobile trading business of Porsche Holding Salzburg as of March 1, 2011. Since our Chinese joint ventures are accounted for using the equity method, the positive trend in the Chinese passenger car market is reflected in consolidated sales revenue mainly in the form of deliveries of vehicles and vehicle parts. At 24.4%, the cost of sales rose more slowly than sales revenue in the reporting period, allowing gross profit to improve to €24.2 billion (€18.1 billion). The gross margin increased to 17.1% (16.0%).

Distribution expenses rose by 20.7% as a result of business expansion, but declined as a percentage of sales revenue. Administrative expenses increased by €0.9 billion to €3.6 billion; this was largely attributable to expanded business volumes and the initial consolidation of companies. At €3.1 billion, net other operating income exceeded the prior-year figure by €0.9 billion. Negative exchange rate effects were partly offset by income from the reversal of provisions. Reversals of provisions are recognized as other operating income, whereas expenses relating to the recognition of provisions are allocated directly to the functions.

The Automotive Division generated an operating profit of €10.0 billion in the reporting period, a significant year-on-year increase of €3.8 billion. Higher volumes and an improved ratio of costs to sales revenue had a particularly positive effect on earnings. The extremely strong business performance of our Chinese joint ventures is not reflected in the Group’s operating profit, as these are accounted for using the equity method. At 7.0% (5.5%), the ratio of operating profit to sales revenue was again higher than in the previous year.

The financial result for the Automotive Division improved by €5.9 billion to €7.6 billion. It was positively impacted by a slight decline in finance costs, the measurement of derivative financial instruments used for currency hedging at the reporting date and improved income from equity-accounted investments included in the consolidated financial statements, especially the Chinese joint ventures and Porsche Zwischenholding GmbH. In particular, the updated measurement of the put/call rights relating to Porsche Zwischenholding GmbH in particular had a positive effect on earnings. This was primarily due to the fact that it will not be possible to implement the merger with Porsche Automobil Holding SE within the time frame laid down in the Comprehensive Agreement. The financial result includes a noncash book loss from both the switch in accounting for the Suzuki shares from the equity method to fair value, as well as from the consolidation of MAN.

SEGMENT REPORTING – SHARE OF SALES REVENUE BY MARKET 2011
as percent

Segment reporting – share of sales revenue by market 2011 (bar chart)

Results of operations in the Passenger Cars and
Light Commercial Vehicles Business Area

Sales revenue in the Passenger Cars and Light Commercial Vehicles Business Area amounted to €129.7 billion in 2011, 24.0% above the prior-year figure (€104.6 billion), due to volume-related factors and the inclusion of Porsche Holding Salzburg. Model and country mix improvements and product cost optimization measures also had a positive effect. Gross profit totaled €22.1 billion (€16.3 billion). Operating profit in the Passenger Cars and Light Commercial Vehicles Business Area rose by 75.9% to €9.0 billion (€5.1 billion).

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RESULTS OF OPERATIONS IN THE PASSENGER CARS AND
LIGHT COMMERCIAL VEHICLES BUSINESS AREA

€ million

 

2011

 

2010

Sales revenue

 

129,706

 

104,627

Gross profit

 

22,108

 

16,328

Operating profit

 

9,042

 

5,139

Results of operations in the Trucks and Buses,
Power Engineering Business Area

In the past fiscal year, we generated sales revenue of €12.4 billion (€8.2 billion) in the Trucks and Buses, Power Engineering Business Area. This increase was due in particular to higher volumes and the consolidation of MAN as of November 9, 2011. At €2.1 billion, gross profit was up 23.0% year‑on‑year. Operating profit declined from €1.1 billion in the previous year to €0.9 billion in fiscal year 2011. This figure includes the negative effects from the amortization of the purchase price allocation for MAN and Scania.

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RESULTS OF OPERATIONS IN THE TRUCKS AND
BUSES, POWER ENGINEERING BUSINESS AREA

€ million

 

2011

 

2010

Sales revenue

 

12,386

 

8,179

Gross profit

 

2,131

 

1,732

Operating profit

 

931

 

1,050

RESULTS OF OPERATIONS IN THE FINANCIAL SERVICES DIVISI0N

Sales revenue in the Financial Services Division increased 22.6% year-on-year to €17.2 billion in fiscal 2011 due to volume-related factors and the inclusion of Porsche Holding Salzburg’s financial services business. Gross profit rose to €3.7 billion (€3.4 billion). Higher volumes resulting from strategic projects and stricter banking supervision requirements saw an increase in distribution and administrative expenses in the reporting period compared with the prior-year figure. Other operating income amounted to €–0.8 billion (€–1.0 billion). Operating profit rose by 36.4% to €1.3 billion. This enabled the Financial Services Division to once again make a significant contribution to the Group’s operating profit. Return on equity before tax was higher than in the previous year at 14,0% (12,9%).

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