Porsche posts steep fall in sales - Totals drop 27.6 per cent to 53,000 cars

Porsche posts steep fall in sales - Totals drop 27.6 per cent to 53,000 cars
By Daniel Schäfer in Frankfurt
Copyright The Financial Times Limited 2009
Published: June 19 2009 11:09 | Last updated: June 19 2009 11:09
http://www.ft.com/cms/s/0/050c11fc-5cae-11de-9d42-00144feabdc0.html


Porsche on Friday posted a drop in its operating profits as the debt-ridden German sports carmaker said a steep fall in sales and higher refinancing costs have weighed on its earnings in the first nine months of its fiscal year.

The maker of the famous 911 sports car said in a statement that it is obliged to make under European Union rules that its pre-tax profit has been additionally burdened by costs for building is new Panamera sedan and a hybrid engine for its Cayenne model.

“A high earnings margin was still achieved,” the sports carmaker said in its statement which did not include any absolute profit totals. It also did not stick to its previous statements that its operating margin had remained in the double-digit range.

Rival premium carmakers have posted steep losses this year in the wake of a drastically falling demand for luxury cars.

Porsche’s sales figures fell by 27.6 per cent to 53,635 cars. But a less-steep decline at its most lucrative and expensive 911 sports car model – which fell by 15 per cent to €4.6bn – helped it avoid a similar drop in revenues.

The family-owned sports carmaker is ailing from a €9bn debt load from its purchase of more than 50 per cent of Volkswagen’s shares.

However, in the first nine months of its fiscal year that started in August 2008, Porsche yet again made large profits from its contentious options trades with Volkswagen shares.

Thanks to a high-flying Volkswagen share price, Porsche’s net profit had already jumped fourfold to €5.6bn – higher than its revenues – in the first half, August 2008 to January 2009, of its fiscal year.

However, analysts have pointed to the fact that these profits are mere paper gains and that Porsche risks large writedowns should Volkswagen’s takeover-inflated share price return to normal price levels.

Porsche has amassed more than 20 per cent in options on Volkswagen’s shares but lacks the money to exercise them. It is facing the dilemma that Volkswagen’s share price would collapse if it were to unwind the options. But to hold on the options, Porsche has to pay a high three-digit million Euro sum each year.

The Financial Times has revealed last week that Porsche was negotiating exclusively with the Qatar Investment Authority about taking a stake of around 25 per cent in the sports carmaker’s holding company.

Such a move would relieve the carmaker of part of its debt burden and strengthen its management’s clout in the merger talks with Volkswagen.

Talks about a possible investment from the Gulf state of up to €2.5bn, which would likely be accompanied by an additional capital injection from the families, will continue for another couple of weeks.

The feuding Piëch and Porsche families have last month agreed in principal to merge the two carmakers and integrate Porsche as the tenth marque alongside other brands including VW, Audi and Bentley.

Ferdinand Piëch, Volkswagen’s chairman and a large shareholder in Porsche, has recently called on Porsche to sort out its financial problems ahead of any merger between the two companies.

The family patriarch and grandson of Ferdinand Porsche, the creator of the VW Beetle, has in the past favoured Porsche to be taken over by VW, a move that would secure his control of the group.

This came after Porsche ran out of money and was forced to suspend its attempt to fully control Europe’s largest carmaker.

The carmaker is frantically looking for liquidity to pay its ongoing costs, after it ran into refinancing troubles earlier this year.

Porsche is seeking a €1.75bn loan from Germany’s government economic stimulus programme to secure the final amount of refinancing it needs.

A preliminary decision by the German government and the state-owned KfW Group on whether to grant Porsche such a loan could be reached today, Steffen Kampeter, budget spokesman for the ruling Christian Democratic Party, told German public radio Deutschlandfunk.