VW quarterly earnings to rise on sales in China

German automaker Volkswagen AG on Thursday is expected to report second-quarter net profit jumped to EUR733 million from EUR283 million a year ago, fueled by its large footprint in the dynamic Chinese market.

According to a Dow Jones Newswires survey of 13 analysts, Volkswagen's pretax profit is expected to rise 47% year-on-year to EUR1.11 billion from EUR751 million, while operating profit is expected to show a 27% rise to EUR1.18 billion from EUR928 million. Revenue is expected to increase 8.1% year-on-year to EUR29.4 billion from EUR27.2 billion.

"Due to very strong market environment for premium cars, we expect Audi's performance to stand out in the quarter," Deutsche Bank analyst Jochen Gehrke said in a recent note to clients. Gehrke has a hold rating on VW stock.

At the core VW brand, Gehrke expects healthy profit in Brazil to help shrug off anemic demand on the company's home turf in Germany, where car sales deteriorated following the end of the country's scrapping incentives that encouraged motorists to trade in aging cars and buy new.

Investors will focus on the outlook for the second half of the year as well, a possible update on the planned merger with Porsche Automobil Holding SE and any indication about progress in forging a heavy-truck alliance between Scania AB and MAN SE.

Volkswagen holds a majority stake in Sweden-based Scania and is the largest shareholder at German engineering company MAN with a 29.9% stake.

Volkswagen's second-quarter earnings are expected to underscore a broad recovery in the automotive industry after a woeful 2009, when demand for cars and trucks contracted sharply amid tight credit markets and a jittery economic environment.

Volkswagen emerged relatively unscathed from the industry gloom compared to most its rivals, thanks partly to its strong presence in China and a small exposure to the U.S. market.

But some analysts have cautioned that the enormous growth seen in China in recent months might start to slow and that the recent recovery in the U.S. appears fragile.