With adjusted EBITDA margins for the Porsche and Bentley division amounting to 40% in 2013, they are ranked as the most profitable segments for Volkswagen AG (OTCQX:VLKAY). These brands offer Volkswagen better margins and average revenues, contributing almost 18% to the company's valuation despite accounting for only 1.5% of net volumes.
Volkswagen anticipates a rise in its profitability as the growth in this segment is expected to spiral upwards.
Bentley and Porsche contributing to Volkswagen profits
Revenues for Porsche went up by 16% in the month of June and amounted to 8.2 billion Euros. Operating margins went down to 17%, as compared to the previous year's 18.3%. This was mainly because the company spent extra funds on research and development. There are plans for continued investment by Porsche, which could further drive down operating margins to almost 15% in the current year. Porsche vehicles are priced higher, which allows them to contribute such a significant amount to the company's net profits.
Porsche recorded a rise in its profits from 573 million last year to 698 million in the current year.
Despite this prediction of a decline in the operating margins for Porsche, it still manages to contribute a significant portion to Volkswagen, with other division like Audi contributing a minor 10% return on sales in June.
Investments increase as the demand for Porsche goes up
The first half of this year marked an 8% year-on-year growth in the demand for Porsche vehicles, where volumes surged to 87,803 units during the first half of the year. Porsche expects that these sales will grow even further as the affluent population increases in number. Since these premium vehicles target high net worth individuals, Porsche expects not only its sales to go up, but also sees a potential to increase its market share.
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