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Abu Dhabi, UAESunday 24 June 2018

Audi revenue tops €60 billion on record deliveries in 2017

This year, Audi will launch more new models than ever and will enter the age of electric mobility, it said

The electric Porsche Mission E concept car at the the Frankfurt Motor Show. The company says new launches and investment in electric will dampen results this year. Reuters / Kai Pfaffenbach
The electric Porsche Mission E concept car at the the Frankfurt Motor Show. The company says new launches and investment in electric will dampen results this year. Reuters / Kai Pfaffenbach

Audi increased its revenue and earnings under difficult conditions in 2017 and, for the first time, revenue surpassed €60 billion (Dh270.56bn) with an operating profit of €5.1 billion before special items, an increase of 4.4 per cent from 2016's €4.84bn.

“In 2017, we demonstrated entrepreneurial strength and above all formulated a determined master plan for the coming years,” said Rupert Stadler, Audi chairman. “We intend to play a leading role in the tremendous upheaval facing our industry. By 2022 alone, we have planned more than €40bn for development activities and investment. We are making Audi fit for this mission with our Action and Transformation Plan.”

In the past financial year, deliveries of Audi cars rose, despite the upcoming generation changeovers for many models, by 0.6 per cent to an all-time high of 1,878,105 automobiles from 2016's 1,867,738, and increase of 8.4 per cent. Despite the unfavourable currency environment, the Audi Group’s revenue increased by 1.4 per cent to €60.12bn in 2017, up from €59.31bn the previous year.

This year, Audi will launch more new models than ever and will enter the age of electric mobility, it said. This will result in what the German car maker said would be another challenging year, before a pick up in deliveries and earnings from 2019.

The car maker said it significantly broadened its electrification roadmap across the entire model portfolio and is collaborating closely with Porsche and Volkswagen. In 2025, Audi will offer more than 20 electrified models that will account for one third of unit sales.

As a sporty spearhead, the premium manufacturer recently announced the four-door Gran Turismo with purely electric drive. Production will start early in the coming decade at the Böllinger Höfe site near Neckarsulm. “We interpret sportiness very progressively with our fully electric e-tron GT, and this is how we will take our high-performance brand Audi Sport into the future,” said Mr Stadler.

Late this year, the Four Rings’ first fully electric series-produced model will be launched: the Audi e-tron 4x4, which allows fast-charging at up to 150 kilowatts, making it ready for long-distance use again in less than half an hour. The e-tron will be produced completely CO2-neutral at the converted Brussels plant where also the model’s batteries will be assembled. Audi Hungaria is ready to start production of the 4x4's electric motor in Győr, Hungary.

Audi plans to again achieve the 2017 record level of car deliveries, although the numerous model changes will at first have a dampening effect. Revenue should increase slightly, it said. Implementing its Action and Transformation Plan, the company aims at an operating return on sales within the target corridor of 8 to 10 per cent, despite high ramp-up costs and upfront expenditures for the future. With a consistent strategic focus and prioritisation, Audi anticipates the ratio of research and development expenditure to revenue to be slightly above the strategic target corridor of 6 to 6.5 per cent. The ratio of capital expenditure to revenue is expected to moderately exceed its target corridor of 5 to 5.5 per cent. The net cash flow should be between €2.7bn and €3.2bn.

Audi said its Action and Transformation Plan aims to achieve positive earnings effects totalling €10 billion by 2022.

“We are implementing our programme of measures quickly and systematically, we are becoming more efficient and we are investing freed-up resources in new, profitable growth," said Alexander Seitz, the manager of finance, IT and Integrity at the firm. "This has already allowed us to decide four additional new models and derivatives with an unchanged budget.”

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Audi said with the Action and Transformation plan, process efficiency in technical development, for example, is set to improve by up to 30 per cent, partially as a result of intensified virtual development, Audi said. The company has increased its budget for further training by a third to a total of more than €0.5bn by 2025.

In China, the Four Rings, together with its joint venture partner FAW, will expand its model range, especially with regard to electric drive and sporty 4x4s, it said. Ten brand new 4x4 versions are planned for the coming five years, seven of which will be produced locally, meaning the Audi portfolio produced locally at FAW-VW will more than double by 2022. With the joint establishment of a new sales company and a joint venture for mobility and digital services, Audi and the FAW Group are restructuring their business in China for the next growth phase, Audi said. In addition, tye firm is in constructive talks with Chinese car maker SAIC about future cooperation in order to further strengthen its involvement in the Chinese market.

With more than 20 market launches this year, Audi will manage the biggest model initiative in its history. The brand will present new automobiles in six of its core model series and successively start their production.

With regard to the settlement agreements on the V6 3.0 TDI diesel emissions issue in North America, in part as a result of the VW diesgate scandal, in 2017 Audi updated the measurement assumptions of provisions in its balance sheet against the backdrop of extensive and technically complex buyback and retrofit programmes. This led to negative special items in an amount of €387 million. They include expenditure and provisioning for technical measures and legal risks. In the previous year, negative special items of €1.79bn were included in Audi’s consolidated financial statements. In addition to the V6 3.0 TDI diesel issue in North America, they were also related to potentially faulty Takata airbags. For the year 2017, the bottom line shows operating profit of €4,671 million (2016: €3,052 million) and an operating return on sales of 7.8 percent (2016: 5.1 percent). Audi achieved profit before tax of €4,783 million (2016: €3,047 million). The strong increase is due not only to lower negative special items, but also to the improved financial result.

In the context of its product initiative and reorganisation of the production network, capital expenditure amounted to €3.9bn up from 2016: €3.4bn in 2016. At the same time, the company achieved a positive net cash flow of €4.3bn up from 2016's €2.1bn, it said.