Porsche 2005 Annual Report Download - page 29

Earnings Remain Strong
Porsche’s earning power remained strong in the reporting year.
Once again Porsche succeeded in increasing the Group’s ex-
tremely high pre-tax result of 1.238 billion Euro in the previous
fiscal year even further. One pleasing development here was
that earnings from the vehicle division increased at a stronger
rate than the corresponding sales revenue, mostly thanks to a
better model mix in terms of profit margin. The unusually large
jump in earnings in the reporting year to a total of 2.110 billion
Euro is due, however, to special factors and non-recurring
effects. This also applies to the rise in the net income for the
year to 1.393 billion Euro after 779 million Euro in the previous
year. These extraordinary effects include the sale of CTS
Fahrzeug-Dachsysteme GmbH, which resulted in a book gain
of 80.7 million Euro, and the Porsche income from the equity
investment in Volkswagen AG.
As the equity investment in Volkswagen is consolidated at
equity, pro rata net income of Volkswagen AG must be allocated
to the Porsche Group. Porsche’s share of 21.2 percent of the
ordinary shares corresponds to 15.4 percent of the ordinary
and preference shares issued by Volkswagen AG. The amount
disclosed by the Porsche Group as income totaled 203.4 million
Euro. The dividend for the equity investment of 21.2 percent of
the ordinary shares held in Volkswagen AG at the end of the
fiscal year amounted to 68.3 million Euro. This dividend was
recorded as income from equity investments at Porsche AG.
Income from hedging transactions in connection with the
purchase of a further 3.9 percent in Volkswagen AG amounted
to a figure well in excess of 100 million Euro.
Porsche AG’s pre-tax profit went up from 872 million Euro
to 1.668 billion Euro; its after-tax profit improved from
528 million Euro in the previous year to 1.254 billion Euro.
The increase in overall unit sales also had a positive effect on
the Group’s sales revenue, which went up by 10.6 percent to
7.273 billion Euro. This figure also includes the sales of 150 mil-
lion Euro recorded by CTS Fahrzeug-Dachsysteme GmbH up until
the date of sale. Other operating income climbed from 192.6 mil-
lion Euro to 1.045 billion Euro. On the other hand other operat-
ing expenses increased from 1.164 billion Euro to 1.709 billion
Euro. Apart from the rise linked to the operating business, this
extraordinarily large increase is attributable to share price hedges
in connection with the purchase of a further 3.9 percent in Volks-
wagen AG. Despite the marked increase in unit sales, the cost
of materials only rose from 2.748 billion Euro in the previous
year to 3.274 billion Euro, and accounted for 44.9 percent of
total operating performance as opposed to 43.4 percent in
the previous year. This item reflects the changed model mix and
also the success of our cautious currency hedging policy.
Although the Porsche Group’s personnel expenses rose from
912.1 million Euro to 1.037 billion Euro, the share of total
operating performance fell from 14.4 to 14.2 percent. Financial
income rose to 196.5 million Euro (previous year: 20.0 million
Euro) and is heavily influenced by the equity investment in
Volkswagen AG. The tax expense of 713.6 million Euro led to
a tax ratio of 35.2 percent (prior year: 37.0 percent). The
main reason for this is the more or less tax-free income from
the equity investment in Volkswagen AG.