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Red ink for Porsche as VW shares written down

Putting Porsche back together: Porsche is said to be operating at a profit, despite taking a $7 billion hit on the 2008-09 balance sheet.

$7 billion loss as Porsche mops up mess from failed take-over attempt

13 Nov 2009

THE financial hangover from Porsche’s ill-fated attempt to wrest control of Volkswagen is evident in Porsche Automobil Holding SE's €4.4 billion ($A7b) pre-tax loss for the financial year ending July 31.

The loss – reflecting a €13 billion ($A20.8b) turn-around from the previous financial year’s €8.6 billion profit – came after the holding company’s bean counters wrote down the value of cash-settled options on shares of Volkswagen AG.

Porsche had taken the options in its failed bid to acquire 75 per cent of VW – an adventure that came unstuck when debt ballooned to more than €10 billion, funds availability dried up and car sales fell during the global financial crisis.

Faced with potential financial collapse, Porsche was forced into a merger with VW, and now faces the future as one of 10 brands controlled by the company it once tried to dominate.

The announcement of the loss comes just days after Porsche AG’s supervisory board elevated Lutz Meschke to the executive board as head of Porsche’s finance and operations division, filling the vacancy left by the departure of executive vice-president financial affairs Holger Harter in July.

Mr Harter fell on his sword after the architect of the failed take-over attempt, Porsche chief executive Wendelin Wiedeking, was shown the door.

Since then, the board has taken joint responsibility for the financial rehabilitation of the company.

It warned in July that write-downs would force a negative pre-tax result for 2008-9.

It said the earnings were “influenced by the hidden reserves and liabilities identified in the course of the purchase price allocation for the shareholding in Volkswagen”.

“This impairment loss was recorded at the end of the reporting period and paved the way for the sale of the substantial part of the options to the emirate of Qatar,” Porsche said.

Qatar is set to become the third biggest shareholder in Porsche after the original Porsche and Piech families and the German state of Lower Saxony.

Qatar’s investment fund has a 10 per cent stake on Porsche, but is set to move that up to 17 per cent.

Despite the red ink in Porsche SE’s pre-tax balance sheet caused by the write downs, Porsche AG - the car-making arm - is set to post a double-digit profit in operations for last financial year, despite a 12 per cent drop in revenue to €6.6 billion.

Porsche said the sportscar-maker was still the most profitable car manufacturer in the world at an operational level.

However, reports from Europe suggest the company is getting set to suspend production at its main factory in Germany for 18 days before the end of the year to balance inventory.

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