Feb. 18 (Bloomberg) -- Volkswagen AG, Europe's largest carmaker, plans to cut its dividend for the first time in 11 years after the rising euro and a writedown tied to the Phaeton luxury car led to a 60 percent decline in fourth-quarter earnings.
Net income fell to 305 million euros ($393 million), or 76 cents a share, from 755 million euros, or 1.94 euros, in the year- earlier period, according to Bloomberg calculations based on Volkswagen's full-year statement.
The euro's 20 percent gain against the dollar last year pushed the maker of the Passat and Golf models to a loss in the U.S., where the Wolfsburg, Germany-based company generates 13 percent of unit sales. Lower-than-expected sales of the Phaeton triggered a writedown of 711 million euros.
``The environment for Volkswagen is going to remain difficult,'' said Markus Brueck, who helps manage 10 billion euros at Metzler Investment and doesn't own Volkswagen shares.
The company proposed a dividend cut of 19 percent to 1.05 euros a share from 1.30 euros because of the decline in earnings. Fourth-quarter sales rose 6 percent to 23 billion euros from 21.7 billion euros.
Shares of Volkswagen rose 57 cents, or 1.4 percent, to 39.89 euros at 12:42 p.m. in Frankfurt. The shares are down 9.7 percent so far this year compared with a 1.1 percent decline in the Bloomberg Europe Autos Index.
Tax Benefit
Fourth-quarter profit exceeded the 222 million-euro median forecast of 12 analysts surveyed by Bloomberg News. The company's results were helped by an overall 154 million euro tax benefit in the fourth quarter. The company said it recognized for the first time tax benefits tied to units in incoming members of the European Union.
``They boosted the net income with a vague tax credit that they don't adequately explain,'' said Patrick Juchemich, an analyst at Bank Sal Oppenheim, who rates the company ``underperform.'' ``The writedown charges were higher than expected.''
Full-year net income fell 57 percent to 1.12 billion euros from 2.6 billion euros, the company said in a statement to the Frankfurt stock exchange. Pretax profit fell 62 percent to 1.53 billion euros. The company's tax bill fell 70 percent to 411 million euros. Sales rose 0.2 percent to 87.2 billion euros.
The writedown included spending on development of the luxury Phaeton model which Volkswagen had capitalized as assets. The Phaeton competes with DaimlerChrysler AG's Mercedes S-Class and Bayerische Motoren Werke AG's 7-Series.
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