Porsche Automobil Holding SE said Friday it expects a smaller loss in fiscal 2010 than previously anticipated and that it is on track for the merger with Volkswagen AG, with a related capital increase planned in the first half of 2011.
Porsche expects a loss of "less than EUR1 billion" in the current fiscal year, the Stuttgart-based company said in a statement. Porsche's fiscal year ends July 31.
The company previously had forecast a loss in the low single-digit billion-euro range, mainly due to accounting effects related to its 50.7% stake in Volkswagen.
In the August-to-April period, Porsche's loss after tax was EUR700 million compared with a profit of EUR4.2 billion in the same period in the prior year. Last year's result was inflated by gains from cash-settled options on Volkswagen shares.
Porsche said the deconsolidation of Volkswagen triggered "a considerable loss," which was partly offset by the first-time inclusion of Volkswagen as an investment accounted for at equity. The deconsolidation of the Porsche Zwischenholding GmbH, which mainly comprises the core sports car unit and related operations, had a positive impact on earnings on holding company level.
Porsche had to fully consolidate Volkswagen in its balance sheet after increasing its voting stake beyond 50% on Jan. 5, 2009, but the move to take over its much larger peer backfired as credit markets turned sour and both companies now are pursuing a merger under VW's leadership.
Volkswagen in December acquired a 49.9% stake in Porsche's core sports car operations through a capital increase as part of the complex merger, which is expected to be finalized in 2011. Porsche pocketed EUR3.9 billion from Volkswagen's investment in the company, which it used mainly to redeem bank liabilities.
Porsche said its net debt stood at EUR6 billion on April 30.
