“Many VW peers, especially in Europe, are getting weaker and weaker”
“VW continues to outgrow peers due to product quality, brand equity”
Some investors worried that Volkswagen might find it difficult to keep its profit growth momentum going, given the weakness of the European market and VW’s expensive switchover to a new production method.
They could have saved themselves the trouble.
VW’s net profit advanced to €3.17 billion in the first quarter from €1.6 billion a year earlier. Analyst scrambled to raise their profit forecasts for 2012, and for superlatives to describe Volkswagen’s performance.
A report from Credit Suisse analyst Arndt Ellinghorst headed “The Apple of Autos” praised the company.
“Investor focus seems to be on one-time costs, potential efficiency gains and other special issue in VW. In our view this overshadows the simple fact that VW is selling more cars, growing more strongly than expected. In our view, there is something more structural going on. Many of VW’s peers, especially in Europe, are getting weaker and weaker which consumers are realising. How else can it be explained that VW first quarter sales in France only declined two per cent while the market fell by 22 per cent,” Ellinghorst said.
“VW continues to outgrow its peers due to product quality and brand equity which will unlikely change much as long as others are struggling to repair their balance sheets,” Ellinghorst said.
Citigroup Global Markets analyst Harald Hendrikse, in his report, called VW “World Champion”.
“It seems VW cannot stop growing. We view VW as the best-positioned global car company by region, with strong market positions in almost all growth markets missing only India, and being under-presented in the U.S.,” Hendrikse said.
Doubters exist
It was possible to find criticism of VW, even if was only in the form of a worry about an inappropriate acquisition in the future from Fitch Ratings, the bond evaluation agency.
“Volkswagen retains high headroom in its current ratings, but M&A remains a significant uncertainty constraining the ratings at this point. Once further potential moves on Porsche and in the truck sector (Scania and MAN) are clarified, the agency will re-asses its opinion on the group and this could lead to positive rating pressure,” said Fitch analyst Emmanuel Bulle.
That also sounds like a rebuke to those who criticised subsidiary Audi’s €860 million takeover of Italian motor-bike maker Ducati last month as a vanity purchase.
Neil Winton – May 1, 2012
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