Porsche SE benefits from positive development at Porsche and Volkswagen

In the fiscal year 2011, Porsche Automobil Holding SE, Stuttgart (Porsche SE), benefited from the positive development of both its investments. Profit from the investments accounted for at equity, comprising the profit from Volkswagen AG and Porsche Zwischenholding GmbH attributable to Porsche SE, reached 4.66-billion euro. Of this figure, 395-million euro was attributable to the Porsche Zwischenholding GmbH group and 4.27-billion euro to the Volkswagen group. However, the result was impacted by a special effect from the adjustment through profit or loss, but without effect on cash, of the valuation of the put and call options for the shares in Porsche Zwischenholding GmbH held by Porsche SE. This special effect amounted to minus 4.37-billion euro in 2011. Overall, Porsche SE achieved a profit after tax of 59-million euro at group level. The group profit before taxes was 28-million euro; tax income of 31-million euro had a positive impact.

The profit from Porsche SE’s investments accounted for at equity reflects the still good development of the two investments. The Porsche Zwischenholding GmbH group sold 116,978 vehicles in the fiscal year 2011. Group revenue came to 10.93-billion euro. The operating profit amounted to 2.05 billion euro. In the reporting year, the Volkswagen group sold 8.36-million vehicles. With group revenue of 159.34-billion euro, the operating profit came to 11.27-billion euro.

Porsche SE’s net liquidity as of December 31, 2011 improved significantly in comparison to the figure as of December 31, 2010, from minus 6.34-billion euro to minus 1.52-billion euro. The reason for this improvement is the capital increase successfully performed in April 2011, from which Porsche SE received a net issue volume of around 4.9-billion euro. Porsche SE used the entire proceed of the issue plus additional available liquidity to repay bank loans totaling 5-billion euro. The remaining liabilities to banks in a nominal amount of two billion euro were refinanced in October 2011 through a new syndicated loan with considerably improved conditions.

The adjustment of the valuation of the put and call options is based on the assessment of the executive board of Porsche SE and the board of management of Volkswagen AG on September 8, 2011 that the merger of Porsche SE into Volkswagen AG was no longer realistic within the framework and timeframe of the basic agreement entered into by the two companies in 2009. In the event of the failure of the merger, both companies had granted each other put and call options for the 50.1 per cent share held by Porsche SE in Porsche Zwischenholding GmbH.

At the end of the short fiscal year 2010 from August 1 to December 31, 2010, the executive board of Porsche SE had estimated the probability of the failure of the merger within the framework and timeframe defined by the basic agreement, and thus the theoretical probability that the put and call options would be exercised, at 50 per cent. In the assessment of the executive board, the probability had increased to 100 per cent as of December 31, 2011. The increase in this probability was a key reason for the considerable non-cash burden on the profit of Porsche SE.

Another reason is the development of the actual enterprise value of Porsche Zwischenholding GmbH, which is determined to a large extent on the underlying planning. An update of the business planning of Porsche AG in consideration of the announced launch of the Macan, an additional model series in the sporty off-roader segment, resulted in an increase in the enterprise value of Porsche Zwischenholding GmbH in the fiscal year 2011, thus further reducing the profit of Porsche SE. The background of these developments is the fixed price specified in the basic agreement for the put and call options on the shares held by Porsche SE in Porsche Zwischenholding GmbH, which is independent of the current enterprise value. This means that higher enterprise values of Porsche Zwischenholding GmbH result in negative effects on Porsche SE's profit that do not impact liquidity.

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