Axel Strotbek Member of the Board of Management of AUDI AG Finance and Organization

Transcription

1 Axel Strotbek Member of the Board of Management of AUDI AG Finance and Organization Speech to the 120th Annual General Meeting of AUDI AG Neckarsulm, May 13, 2009 Check against delivery Ladies and Gentlemen, Dear Stockholders, Chart Logo The economic environment worldwide deteriorated with unprecedented speed and by an unexpected degree in the course of the past fiscal year. Triggered by the turbulence on U.S. financial markets midway through the year, events then proceeded to spill over into the real economy, with serious consequences. By the end of the year, the global economy then found itself in a downturn of unexpected ferocity. The major industrial nations of the United States and Japan, but also Western Europe's national economies, thus found themselves in a deep recession, in which they currently remain.

2 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 2 Furthermore, important emerging countries in Asia, Latin America and Central and Eastern Europe have been badly affected by the global economic downturn and saw their economies lose considerable momentum during the course of Chart Development of overall markets The automotive industry traditionally tends to be particularly affected by such massive reversals in world economic growth. For instance, after posting growth of 4 percent, the global economy was plunged into recession by the oil crisis in the early 1970s. Meanwhile, sales in the German and British car markets slumped by over 20 and 30 percent respectively. A similar pattern was experienced at the start of the 1980s and in the mid-1990s. Once again, major car markets such as Spain and Italy experienced a much more drastic reversal than the overall trend in global economic growth. The economic collapse since the middle of last year is no exception to this rule, and has dramatically affected global demand for cars. There was consequently a sharp downturn in demand in major sales markets such as Germany, Great Britain and France in the fourth quarter of The Spanish market as a whole even shed 50 percent compared with the previous year. For 2008 overall, this led to a 5.8 percent drop in worldwide vehicle sales to 55.7 million cars the lowest total for five years. Chart Logo Despite this extremely difficult and challenging economic environment, we still managed to add to the many records we have set in recent years.

3 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 3 As already mentioned by Rupert Stadler, Chairman of the Board of Management, 2008 saw us deliver over one million vehicles of the Audi brand to customers, for the first time in the history of our company. We also pushed up all key performance indicators to new record levels. We consequently achieved the targets we had set ourselves for 2008 in every respect. Let me now explain what lies behind the development in the key financial figures for the Audi Group. I will start with the major items in the Income Statement. Chart 5-year pattern in revenue We were able to increase the revenue of the Audi Group by 1.7 percent in the past fiscal year, to the new record level of EUR 34.2 billion. Chart Analysis of revenue The main driving force behind this development was the successful performance of vehicle sales. Both the higher sales volume and positive price and mix effects were the factors responsible for the revenue increase of almost EUR 780 million year on year. The pattern of demand for the newly launched models in the A4 car line, as well as for the A5 Coupé and the Audi R8 sports car, was particularly healthy in this respect. Our new Audi Q5, which we have been rolling out gradually on the markets since the end of last year, also already had a positive impact on revenue. Revenue from sales of genuine parts also remained very healthy. This rose overall by EUR 115 million in the past fiscal year. The revenue from other sales showed a year-on-year rise of EUR 355 million. This increase is attributable in particular to the inclusion for the first time of revenue from VW Polo cars

4 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 4 supplied to Volkswagen AG, following the initial consolidation of AUDI BRUSSELS S.A./N.V. Exchange rate effects, in particular due to the pound sterling and the U.S. dollar, were again clearly negative. After elimination of exchange rate burdens, we would have been able to post an increase in revenue of 3.7 percent compared with the 2007 figure, to almost EUR 35 billion. Chart Cost of sales As a result of our increased business volume, the cost of sales also rose to EUR 28.8 billion. The rise here of 1.3 percent was once again disproportionately low compared with revenue, also bearing in mind that the latter was eroded by exchange rate factors. This supplies yet further evidence of the huge success of our long-standing measures to optimize processes and the cost of materials and to boost productivity. Chart Gross profit After deduction of the cost of sales from revenue, we thus increased the gross operating profit by 4.1 percent to more than EUR 5.3 billion. Chart Operating profit The distribution costs rose by over 18 percent to EUR 3.2 billion in the past fiscal year. This increase is due to market and volume factors, but also to the model changeover for the A3 and A6 and the launches of numerous new models (A4 Avant, TTS, RS 6, Audi Q5). The higher administrative expenses were higher than in the previous year, above all due to first-time consolidation effects for AUDI BRUSSELS S.A./N.V., Audi Zentrum Hamburg GmbH and Audi Zentrum Berlin-Charlottenburg GmbH & Co. KG. The other operating result improved to around EUR 970 million mainly thanks to higher earnings from the settlement of hedging transactions. Our advantageous hedging operations therefore compensated for adverse exchange rate effects on revenue to a large degree.

5 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 5 Overall, we achieved an operating profit of more than EUR 2.7 billion. This represents a rise of 2.5 percent and brings us the highest operating profit in the history of our company. We owe this achievement, in an extremely challenging economic environment, first and foremost to our dedicated, highly motivated workforce. We on the Board of Management are particularly proud of the tremendous personal commitment that everyone at Audi has shown, and of the unique way that everyone has operated as a team. Chart Analysis of operating profit I'd now like to look at the main driving forces behind the profit performance in greater detail. The increased sales figures I have already mentioned and other improvements in the mix added up to an overall positive effect of around EUR 320 million on operating profit. On the other hand, the net effect of exchange rate effects was a loss of around EUR 290 million, mainly due to the pound sterling and the U.S. dollar. By further optimizing the cost of materials, we realized savings worth a total of approximately EUR 390 million within product costs. The expansion of business activities and the first-time consolidation of AUDI BRUSSELS S.A./N.V. resulted in a rise in fixed costs, reducing earnings by around EUR 350 million. Chart Profit before tax The rise in the financial result of around EUR 200 million is due on the one hand to higher interest income from the investment of increased cash and cash equivalents and on the other hand to a higher profit from our investment in FAW-VW.

6 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 6 Taking account of the financial result, we therefore increased profit before tax by some 9 percent to almost EUR 3.2 billion. Chart Profit after tax The tax expense amounted to around EUR 970 million in the past fiscal year. We therefore increased the consolidated net profit by 30.4 percent to the new record figure of EUR 2.2 billion. Ladies and Gentlemen, As you can see, the absolute earnings figures in the Income Statement are impressive proof of our achievements in the past fiscal year. The success of 2008 is also reflected in the Audi Group's key profitability ratios. Chart Key profitability ratios In the past fiscal year we pushed the operating return on sales up even further from 8.0 to 8.1 percent. We improved the return on sales before tax even more steeply by 0.6 percentage points to 9.3 percent. The return on investment reached an all-time record of 19.8 percent despite the much more difficult economic environment. Dear Stockholders, The key profitability ratios therefore supply impressive evidence of our company's intrinsic strength. I would now like to explain the main cash flow figures and the net liquidity in greater detail.

7 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 7 Chart Cash flow from operating activities The cash flow from operating activities amounted to more than EUR 4.3 billion in The slight year-on-year fall is due to the cyclical rise in inventories in the fourth quarter. But we promptly adjusted our production capacity accordingly in order to reduce inventories, and implemented sales measures to optimize stock management. Chart Net cash flow As a result of extending and rejuvenating our attractive model range, we stepped up investing activities in the past year. Not including the investment portfolio, the cash outflows for investing activities rose by almost 16 percent to EUR 2.4 billion. Despite the slightly lower cash flow from operating activities coupled with higher investment spending, the net cash flow reached the high total of EUR 1.9 billion. Put another way, this means the following: Even amid appreciably more difficult market conditions, in 2008 the Audi Group was able to finance its entire investment from its own resources and still generate a surplus of EUR 1.9 billion. Chart Net liquidity The Audi Group's financial strength is consequently also reflected in a further rise in net liquidity. We increased this by over 18 percent to more than EUR 9 billion. Ladies and Gentlemen, Dear Stockholders, This means that over the past few years, we have created a sound financial basis that enables us to invest in new products, and therefore in the future and in the source of growth for future years, even at a time when the economy is experiencing such difficulties.

8 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 8 And we have done so entirely from our own resources without having recourse to external sources of financing. We can therefore see more than just the current crisis. Above all, we can see an opportunity to strengthen the Audi brand's market position permanently and gain a competitive edge over our immediate competitors. We will use this opportunity to our advantage. Chart Audi Consolidated Balance Sheet - assets Finally, I would like to look at how the main items on the balance sheet have developed in greater detail. The balance sheet total rose by 15.4 percent or EUR 3.5 billion in the past fiscal year, to around EUR 26 billion. Of this increase, a sum of around EUR 570 million is attributable to the first-time consolidation of Audi Brussels. On the assets side, the non-current assets of around EUR 9.5 billion were up EUR 1.2 billion on the previous year. Current assets likewise rose by some EUR 2.3 billion to a current EUR 16.5 billion. The main driving force behind this development was the substantial increase in cash and cash equivalents of some EUR 1.6 billion or 18.5 percent, to a current total of EUR 9.9 billion. The balance sheet item "Inventories" moreover rose by almost EUR 690 million from EUR 2,661 million to EUR 3,347 million for cyclical reasons. Chart Audi Consolidated Balance Sheet equity and liabilities On the equity and liabilities side, equity rose by just under EUR 2 billion to EUR 10.3 billion. Alongside a cash injection of EUR 706 million by Volkswagen AG, this development was attributable in particular to the allocation to the balance of net profit to the other retained earnings.

9 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 9 The equity ratio for 2008 was consequently 39.6%. Borrowed capital showed a rise of around EUR 1.5 billion on the previous year, to EUR 15.7 billion. Alongside a sales-related rise in trade payables, this was prompted by higher other provisions. Overall, therefore, the balance sheet figures likewise bear testimony to our company's healthy financial structure. Ladies and Gentlemen, Dear Stockholders, Chart Overview of key performance indicators On the strength of the key financial figures for 2008 that I have just outlined, the Audi Group is among the most profitable companies in the international automotive industry. This is an achievement of which we can be particularly proud, considering the dramatic economic developments of the past year. The main factor driving this trend is the methodical expansion of our fresh, attractive product range over the past few years. We will furthermore continue with our model initiative despite the current crisis the renewed positive performance of our net liquidity means we have already established an excellent basis on which to do so. The challenge now is to set the direction for our company's future growth, so that we ultimately emerge from the crisis in an even stronger position. Chart Logo We furthermore comprehensively took into account all identifiable risks on both the procurement side and the sales side last year, and remain faithful to our long-standing successful principle of far-sighted entrepreneurial action.

10 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 10 Nevertheless, we too are currently discovering that we are not immune to the dramatic downturn in demand on car markets worldwide. Deliveries to customers of Audi brand vehicles in the first quarter were down 16.4 percent on the previous year's high figure, at 210,027 vehicles. Yet the Audi brand still performed much better than car markets as a whole worldwide, which retreated by 21 percent over the same period. On balance, therefore, we succeeded in further increasing the Audi brand's market shares and in further strengthening our position relative to our competitors. In the important Western European market, for example, we moved into pole position in the premium segment with a market share of 4.6 percent. As expected, falling vehicle deliveries eroded the financial performance, financial position and net worth of the Audi Group in the first quarter of With sales of vehicles depressed by the economic downturn, revenue of EUR 6.7 billion was unable to match the excellent prior-year figure of EUR 8.3 billion. Although the operating profit was likewise down on the previous year at EUR 363 million, in view of the general market conditions its performance was in line with our expectations. The clearly positive result is particularly due to our resolutely disciplined approach to costs throughout the company, coupled with our systematic investment management practices. We also took prompt corrective action in response to the currently very difficult economic conditions. We have for instance made more trenchant cutbacks to our vehicle production operations than the fall in demand, and thus substantially reduced our stock levels worldwide.

11 120th Annual General Meeting of AUDI AG, May 13, 2009 Page 11 All in all, we have therefore established a sound basis for posting a clearly positive operating profit for the 2009 fiscal year. In a few moments Mr Rupert Stadler will be outlining the shape of things to come for the Audi Group. Thank you.