Volkswagen’s Porsche Unit 2021 Returns Grow to Bolster IPO Plan

(Bloomberg) -- Returns at Volkswagen AG’s Porsche unit rose last year, dwarfing its namesake passenger car brand, to bolster the German carmaker’s plan for a listing of the iconic sports-car maker. 

Porsche reported an operating margin of 16.5% last year, up from 15.4%, Europe’s biggest automaker said Tuesday. For VW’s main mass-market brand, the measure recovered to 3.3%, excluding returns from the highly profitable Chinese venture. 

Volkswagen is pushing ahead with plans for an initial public offering during the fourth quarter, against a backdrop of highly volatile global markets limiting investor appetite. The carmaker last week said it expects group returns to be in line with last year’s result, but warned the outlook might worsen due to unpredictable fallout from the war on Ukraine. 

The manufacturer said it expected moderately higher global passenger car sales for this year, while still saying deliveries will stay below levels seen before the pandemic. The view assumes shortages of semiconductors and commodities to “become less intense,” VW said in its annual report. 

As carmakers pursue broad rollouts of EV models, gyrating raw material and energy prices are adding to the pressures. Russia is a key exporter of host of inputs, including nickel and palladium as well as steel, while the ability of manufacturers to pass on higher costs to consumers is limited. Car prices have already rocketed as the chip shortage idled plants amid strong vehicle demand. Disruption from the war in Ukraine has forced VW to shut plants more recently. 

The Porsche IPO is part of a deeper overhaul at VW to accelerate the industry’s biggest electric vehicle rollout that has gotten off to a bumpy start amid the pandemic and crippling chip shortage. This month, the company finalized plans for a new 2 billion-euro factory close to it’s sprawling headquarters in Wolfsburg, the same day that Tesla Inc. received a long-awaited approval to start its first European plant near Berlin. 

The listing would see a stake of as much as 25% of preferred shares, which don’t carry voting rights, sold to investors. The billionaire Porsche and Piech clan, which control Volkswagen through voting shares, would receive a special dividend from VW to fund buying a blocking minority stake in Porsche.

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