VW reports $6.9B profit, gives cautious outlook

[July 28, 2011]  FRANKFURT, Germany (AP) -- Carmaker Volkswagen AG said Thursday that net profit more than tripled in the second quarter on booming sales in emerging markets, but its shares slumped after it warned of challenges in coming months.

Net profit reached euro4.78 billion ($6.86 billion), far above the euro1.35 billion recorded in the same quarter a year ago and well above average analyst expectations.

Revenues rose 21.5 percent to euro40.3 billion. Unit sales were up strongly in emerging markets such as Russia, Turkey, South Africa, China and Argentina. U.S. sales also rose, though not by as much.

VW shares, however, slumped 6.2 percent to euro125.55 in early afternoon trading in Germany as investors worried that the company would struggle to keep up its profitability after it warned about challenges ahead.

The carmaker fell just short of analysts' estimates on operating profit, a key measure of earnings before interest and taxes -- it came in at euro3.17 billion, whereas analysts on average had predicted euro3.21 billion.

Analysts often consider the operating earnings as a clearer picture of how a company's basic business is developing.

The company, meanwhile, warned that the rest of the year could prove challenging. "Volatile interest-rate and exchange rate developments as well as raw materials prices could weaken the positive volume effects," it said in a statement Thursday.

Chief executive Martin Winterkorn said that "the coming months will challenge us and demand effort in order to maintain this high level."

Winterkorn's cautious outlook echoed statements from other large industrial firms such as Siemens AG and BASF SE, which also reported profits but foresaw less solid growth in months ahead.

[Associated Press; By DAVID McHUGH]

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