Porsche Warns On Growth, Citing E-Cars

   (FROM THE WALL STREET JOURNAL 3/12/16) 
   By William Boston

German sports-car maker Porsche AG posted record annual earnings on Friday but warned not to expect robust growth this year, citing heavy investment in electric-car technology and a possible falloff in luxury-car demand.

The company, best known for its 911 sports car and Cayenne luxury sport-utility vehicle, said net profit rose 6% to 2.33 billion euros ($2.59 billion) last year on a 25% jump in revenue to 21.5 billion euros.

Porsche, a unit of Volkwagen AG, said the first full year of sales for its Macan compact luxury SUV contributed to a 19% rise in volume to 225,121 vehicles, the company's best-ever tally.

Company officials said an operating profit margin of 15.8% for the year made Porsche the most profitable car company in the world. But they warned against "exaggerated expectations" for the future, even as the company held to its profit target.

Porsche forecast only a slight increase in revenue and flat earnings this year, noting lower profit margins from its growing sales of luxury SUVs and heavy investment in new technology to meet stricter emissions regulations. Porsche is also ramping up spending to join the growing club of makers of luxury electric cars.

"We have a very clear profit [margin] target of 15%," Chief Executive Oliver Blume told reporters in Stuttgart, Germany. "Of course, it is possible that from time to time we will come in above or below, but we are sticking to the target."

A slowdown in profit at Porsche could spell trouble for its parent Volkswagen, which is embroiled in an emissions-cheating scandal and could face tens of billions of dollars in fines and compensation for customers. Porsche is one of Volkswagen's main sources of profit.

On Friday, Volkswagen reported that the group's February sales dropped 1.2% from a year earlier to 693,300 units, with gains at Audi, Skoda, Seat and Porsche failing to offset a 4.7% drop for the VW brand. Group sales in the U.S., where the company has been vigorously criticized for its diesel emissions scandal, dropped 7.2% to 37,700 units.

The scandal has spilled over to Porsche. The company's Cayenne SUV uses a tainted 3-liter engine made by Volkswagen's Audi AG unit. Chief Finance Officer Lutz Meschke said, however, that potential costs to Porsche from the scandal would be moderate.

Turning to the capital costs that are set to weigh on Porsche's earnings, Mr. Meschke cited development of electric vehicles to meet CO2 emissions targets. Electric and hybrid versions of the company's Cayenne and Panamera models cost 10,000 euros more than their conventional versions of these models.

"You can't get these additional costs back through correspondingly higher prices," Mr. Meschke said.

Porsche, under pressure to produce luxury electric cars to take on niche rival

Tesla Motors Inc., is also planning a "Tesla-killer" battery-electric sporty sedan that it calls Mission-E. The company plans to invest 1 billion euros in a new factory to build the car on top of the costs to develop it.

(END) Dow Jones Newswires

March 12, 2016 02:47 ET (07:47 GMT)

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