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Volkswagen Inc. Financial Analysis

Volkswagen is the most successful multi-brand group in the automotive industry. The group consists of ten brands from seven European countries: Volkswagen Passenger Cars, Audi, Skoda, Seat, Bentley, Volkswagen Commercial Vehicles, Scania, MAN, Bugatti and Lamborghini. Each brand has its own character and operates as an independent entity in the market in order to better meet the specific needs of different segments and countries. In addition, Volkswagen owns 49.9% of Porsche Zwischenholding GmbH. Corporation with its headquarters located in Wolfsburg is one of the world's leading automobile manufacturers and the largest carmaker in Europe. Worldwide, 502,000 employees produce about 34,500 vehicles each day, working or involved in vehicle related services. Volkswagen Group sells its vehicles in 153 countries. In 2011, the Group increased the number of vehicles delivered to customers to 8.3 million (2010: 7.2 million), which corresponds to 12.3 per cent share of the world passenger car market.

Currently, the key markets include Western Europe, China, Brazil, USA, Russia and Mexico. Volkswagen was able to further expand its good competitive position, despite the problems, the car in 2011 and significantly increased the market share of the Group in important key markets.

The Volkswagen Group’s sales revenue amounted to €144.2 billion in the period from January and September 2012. The 24.0% increase in comparison with the prior-year period was primarily attributable to higher volumes and the consolidation of Porsche Holding Salzburg (March 1, 2011),  MAN SE (November 9, 2011) and Porsche AG (August 1, 2012). The proportion of the Group’s sales revenue generated outside Germany was 80.1% (78.0%).  The Volkswagen Groups gross profit rose by 26.8% year-on-year to €27.2 billion in the first nine months of 2012. High write-downs relating to purchase price allocation for MAN and Porsche in the period shortly following their acquisition were offset by positive exchange rate effects, higher volumes and improved product costs. At €23.0 billion, the Volkswagen Group’s profit before tax in the period from January to September 2012 exceeded the 2011 figure by €6.3 billion due to positive measurement effects. Profit after tax rose by €6.5 billion to €20.2 billion.

Income Statement for the Period July 1 to September 30  Volkswagen Group

€ million

2012

2011

Sales revenue

48,848

38,512

Cost of sales

– 39,796

– 31,239

Gross profit 

9,052

7,273

Distribution expenses

– 4,665

– 3,667

Administrative expenses

– 1,484

– 877

Other operating income/expense

– 561

162

Operating profit

2,343

2,891

Share of profits and losses of equity-accounted investments

11,332

533

Other financial result

– 776

4,979

Financial result

10,556

5,513

Profit before tax

12,9

8,404

Income tax expense

– 1,571

– 1,257

Profit after tax

11,328

7,146

Noncontrolling interests

40

107

Profit attributable to shareholders of Volkswagen A

11,289

7,039

Analysing Volkswagen Group Income Statement for the Period July 1 to September 30, sales revenue in 2012 compared with 2011 year increased from 38.512 to 48.848, represents 26.84% of growth. Gross profit increased from 7.273 in 2011 to 9.052 in 2012. Operating profit decreased from 2.891 contrary to 2.343 at -18.96%. Financial result in 2012 increased by 91.4747 from 5.513 to 10.556. Profit before tax in 2012 was 12.900, which is 53.50% compared with the 2011 year 8.404. Profit after tax in 2012 was 11.328, and 7.146 in 2011, also increased. Profit attributable to shareholders of Volkswagen AG increased from 7.039 to 11.289, at 4.25, which is 60.38%. So almost all the major indexes raised up in Income Statement in 2012.

Balance Sheet as of September 30, 2012 and December 31, 2011  Volkswagen Group

€ million

2012

2011

Assets

 

 

Noncurrent assets

192,223

147,986

Current assets

116,75

105,64

Total  assets

308,973

253,626

Equity and Liabilities

 

 

Equity

78,391

63,354

Noncurrent liabilities

117,647

89,216

Current liabilities

112,935

101,057

Total equity and liabilities

308,973

253,626

Analyzing the Balance Sheet for the Period January 1 to September 30, we can identify the dynamics of increase. Noncurrent assets increased by 44.24 (29.89%) from 147.986 in 2011 to 192.223 in 2012. Current assets also increased by 10.51685%, from 105.640 in 2011 to 116.750 in 2012. Total assets increased by 21.82%. Total equity and liabilities increased by 55.347. All of its components, such as Equity, Noncurrent liabilities and Current liabilities increased in 2012 in comparing with 2011 year.

Cash Flow Statement for the Period January 1 to September 30 Volkswagen Group

€ million

2012

2011

Cash and cash equivalents at beginning of period

16,495

18,228

Gross cash flow

15,223

14,561

Change in working capital

– 9,410

– 7,825

Cash flows from operating activities

5,813

6,736

Net cash flow

– 5,737

– 1,696

Cash flows from investing activities

– 13,653

– 9,155

Cash flows from financing activities

8,736

5,588

Net change in cash and cash equivalents

943

3,038

Cash and cash equivalents at September 30

17,438

21,265

Gross liquidity 

31,151

31,141

Net liquidity at September 30

– 85,194

– 54,208

The Cash Flow Statement for the Period January 1 to September 30 presents the cash inflows and outflows in the Volkswagen Group and in the Automotive and Financial Services divisions. Cash and cash equivalents comprise cash at banks, checks, bills, cash-in-hand and call deposits. At beginning of this period it decreased by 1.733, which is -9.51%. Gross cash flow contrast in comparing increased from 14.561 to 15,223 € million. Index Change in working capital was - 7.825, and in 2012 - 9.410. Cash flows from operating activities decreased from 6.736 to 5.813, to -13.70%. 

Cash flows from investing activities in 2011 were - 9.155, and in 2012 - 13.653.Cash flows from financing activities increased from 5.588 to 8.736. Net change in cash and cash equivalents was 3,038 in 2011, and in 2012 - 943. Cash and cash equivalents at September 30 in 2012 were 17.438 and 21.265 in 2011, declined by -18.00%. Net liquidity at September 30 sum to - 85.194, and in 2011 - 54.208.

Volkswagen Group company is one of the largest name in auto manufacturers in the first half of 2012, despite the growing problems in the automotive market. Volkswagen Group has a strong position in the international market, which will enable them to outperform the market as a whole, despite the difficult economic situation. Volkswagen Group increased its revenue. Operating income increased. Profitability on sales after nine months was at the same level.

Against the background of economic uncertainty, company still improves cost structure for flexible manufacturing and technological leadership in many areas, the company is well prepared to meet the challenges. Their financial situation is paying off like never before.