Volkswagen (VW) will meet its 2008 pretax profit target of €5.1 billion a year earlier than planned as cost cuts boost results, the group said today.
After reporting second-quarter operating profit surged to €1.74 billion, far better than analysts expected, Volkswagen said it would "significantly" exceed in 2007 the previous year's figure before special items as it goes on to sell over 6 million cars for the first time ever.
The company had previously just forecast that operating profit would "probably" surpass last year's pre-exceptional result, which was €4.38 billion.
Although its sales mix deteriorated as revenue growth lagged vehicle sales, VW's cost-cutting dramatically improved results, revealing a sharp improvement in its quarterly operating margin to 6.1 per cent.
While the VW brand continued to boost its performance on the back of last year's successful restructuring, Audi's earnings grew remarkably while even the group's struggling Spanish unit Seat managed to swing to a small quarterly profit.
Results were given a lift from a €334 million quarterly gain in its so-called "other" operating profit, which often include factors like releases from provisions on warranties and is a figure difficult to predict. Once this is stripped out, VW's results fell a bit short of consensus estimates.