Porsche 2004 Annual Report Download - page 31

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Porsche Stock Prices stimulated by the General Situation
Financial markets made a worldwide recovery in the review year,
though stock exchange indices failed to reach the high levels com-
monly encountered during the New Economy boom. Nevertheless,
prices developed in a positive manner, this being largely due to an
improved company earnings situation. After some years of falling
profits or even losses, the cost reduction programs initiated during
the crisis are now yielding results. In addition, the order situation in
the industrial sector has improved worldwide, and satisfactory new
business was recorded in the financial sector as well.
During the review year, the German Stock Market Index (Dax) remained
for lengthy periods at or around the 4,000-point mark. Regular signs
of upward potential took it close to 5,000 points by the middle of 2005,
and this level was in fact exceeded in the late summer. In Germany,
this has led to a continuation of the positive stock market trend already
observed in the previous year. The question of the duration of this up-
ward trend nevertheless remains open, since there is still no evidence
of an effective, lasting domestic economic recovery.
Both in Germany and worldwide a degree of reticence on capital
markets can be observed, in particular on the part of private investors.
The reasons for this remain the uncertain international political situa-
tion and fear of terrorism and violence. Attacks continued after the
elections in Iraq early in 2005, and those that took place in London
and in Egypt during the summer created renewed pessimism on the
trading floor. The raw materials market situation also suggests that
excessive stock market optimism would be misplaced. Price increases
for steel and oil in particular have regularly had a negative effect on
stock market prices during the review year.
Despite this situation, Porsche stock has been able to increase its
value significantly. At the beginning of the company’s fiscal year in
August 2004 it was quoted at 537 Euro; at the end of the fiscal year,
in July 2005 it had reached 654 Euro, an increase of 21.8 percent.
In the same period, the Dax index gained 26.5 percent and the auto-
motive industry index 22 percent. The more marked gained made by
these indices compared with Porsche stock are due only to changes
in the Executive Board of a large Dax-listed automobile corporation
which led to a sharp rise in the index at the end of July. For long
periods during the review year, on the other hand, Porsche stock
outperformed the automotive industry index.
Many investors hold the view that Porsche sets itself apart from other
companies in this sector by its policy of focusing clearly on its core
business activities and having pursued a successful and highly profit-
able growth course for a number of years. The stock market has
acknowledged this corporate strategy by way of a steady increase
in the stock price, which reached an all-time high of 685.98 Euro
on July 19, 2005. This peak value evidently tempted a number of in-
vestors to take their profits, with the result that the stock price
subsequently fell back slightly.
Several Stock Price Upsurges
During the review year, Porsche stock passed through three phases
of distinct upward movement; these were associated with the an-
nouncement of good business results and of new models and model
versions. During September 2004, when the world premiere of the
new Boxster took place and provisional results for the 2003/04
fiscal year were announced, the stock price rose to almost 540 Euro.
In the weeks following the stockholders’ annual general meeting,
which was held at the end of January 2005 and at which the figures
for the 2003/04 fiscal year were explained in detail to stockholders,
Porsche stock began its next strong phase of upward movement,
reaching 570 Euro in March and thus almost equaling the previous
year’s peak value. Among other factors, this positive trend reflected
the satisfactory business progress made in the first half of the
review year.
From May until some way into July, the stock price continued to rise
steadily, surmounting the 600-Euro barrier at the beginning of June.
The stock was at times only 15 points short of the 700-Euro mark
during this upward movement, which was fueled by a further interim
report and by the outstanding market successes of the latest 911
and Boxster model generations, but also by speculation concerning
a possible fourth Porsche model line.
The strength of Porsche stock also benefited from the company’s
close contacts with active financial market participants. Corporate
perspectives were explained in detail to institutional investors and
analysts at road shows held at the main financial centers at home and
abroad and in the course of intensive discussions at Porsche’s head-
quarters in Zuffenhausen. These activities resulted repeatedly in a
commitment to Porsche stock. Investors and analysts were above all
impressed by the strategy that enabled the Cayenne to record highly
successful growth in a segment new to Porsche. The new generations
of sports cars were also given a most positive reception. In view
of this situation, the majority of financial market experts continued to
recommend the purchase of Porsche stock, and at the end of the
fiscal year many of them raised their stock price forecasts again.
Porsche Stock 2004 ⁄ 05
In July 2005 the Porsche share price reached its highest level so far,
at 686 Euro