Porsche 2006 Annual Report Download - page 37

Porsche AG’s pre-tax profit went up from 1.668 bil-
lion Euro to 2.918 billion Euro; its after-tax profit
improved from 1.254 billion Euro in the previous
year to 1.930 billion Euro.
The increase in overall unit sales also had a positive
effect on the Group’s sales revenue, which went up
by 3.4 percent to 7.368 billion Euro. Other operating
income climbed from 1.045 billion Euro to 7.264 bil-
lion Euro. On the other hand, other operating expenses
increased from 1.709 billion Euro to 4.600 billion
Euro. This extraordinarily large increase is attribut-
able first and foremost to the aforementioned share
price hedges. Cost of materials rose to 3.660 billion
Euro (previous year: 3.274 billion Euro), and now
accounts for 48.6 percent of total operating perfor-
mance after 44.9 percent in the previous year. This
item reflects the changed model mix and also the
success of our cautious currency hedging policy.
The Porsche Group’s personnel expenses rose from
1.037 billion Euro to 1.264 billion Euro. Financial
income, which rose to 1.118 billion Euro (previous
year: 196.5 million Euro), is heavily influenced by the
equity investment in Volkswagen AG. The higher level
of refinancing has led to higher interest expenses of
272.2 million Euro (previous year: 198.6 million Euro).
The tax expense of 1.615 billion Euro led to a tax rate
of 27.6 percent (previous year: 35.2 percent).
The main reason for this low tax rate is the more or
less tax-free income from the equity investment in
Volkswagen AG.
Foreign Currency and Cash Management
The foreign currencies most important to Porsche
fluctuated significantly again during the past fiscal
year. In view of this situation, the strategy of
securing the currencies most important to the com-
pany in the medium term and thus creating a stable
planning platform once again proved to be worth-
while. The currency hedging strategy is based on
analysis of the principal national economies and on
technical currency and analytical models. In a next
step, various instruments are implemented to pro-
tect Porsche against exchange rate risks.
Hedging agreements are concluded only with banks
of high standing, so that the credit risk is minimized.
We also secure loans made to group entities by
means of interest hedges. Cash-settled share price
hedges are used on the one hand to hedge the take-
over offer for shares in Volkswagen AG and also to
obtain short-term liquidity. The market is monitored
closely on a daily basis, with reference to selected
banks.
Currency and cash management organization is in
accordance with the standard drawn up by German
industry, and is subject to strict internal control,
with directives stating the nature and extent of these
transactions and the procedures to be adopted.
The basic principle of segregation of functions is
adhered to, and special data processing systems
are employed for the valuation and monitoring of all
transactions. Porsche’s investment policy complies
with the basic principle that investment security
takes clear precedence over any attempt to secure
an unusually high return on investment. We therefore
deposit our cash with banks of impeccable credit-
worthiness in the form of overnight or fixed-term
deposits. In addition, Porsche also invests in money
market funds and makes use of special security
investment funds when liquidity has to be deposited
in the medium or even long term.
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04 ⁄ 05 05 ⁄ 06 06 ⁄ 07
240
200
160
120
80
40
44.74 78.22 239.86
Earnings per Preferred Share
in Euro