Volkswagen profits slide

Analysts welcomed VW's full-year prediction

Europe's leading automotive group, Volkswagen, has said its profits fell 20% during the first three months of this year to 997m euros (£615m; $900m).

But in spite of the weak winter, the company reiterated that the year as a whole should deliver a performance similar to last year's.

"We assume that in the full year 2002 we will at least match the pre-tax profit of the preceding year," VW said.

"The figures were better than expected," said Deutsche Bank's Lars Ziehn.

Matching last year?

"The outlook is stable and it is very positive that they are sticking to their forecast in difficult markets," said Mr Ziehn.

"They have kept their outlook the same and that is good," agreed HypoVereinsbank's Albrecht Denninghoff.

But other analysts were sceptical.

"We question their ability to maintain earnings," said Merrill Lynch's Stephen Reitman.

In 2001 the group - which owns the Seat, Skoda, Audi and Volkswagen brands, as well as Bentley, Bugatti and Lamborghini - made pre-tax profits of 4.4bn euros, up 18.6% compared with 2000.

Delayed recovery

The weak economies in Germany and the US hit VW's profits during the last few months of last year and during the first few months of this year, the company said.

The group's sales fell 21.3bn euros or 5% in cash terms, though in terms of the number of cars sold the fall was 13% during the January to March period.

VW said it expects a pick-up in demand as the economic recovery takes hold later this year, and this along with further cost cutting should boost its full-year profit figure.

"Matching the previous year's profits... seems a pretty tough challenge," said Mr Reitman.

"The question is how much better can it get in the United States?" he said.

While "in Europe they are underperforming the domestic market. I'm not particularly optimistic for Europe," he added.

VW shares gained 4% in early trading.