Porsche
IPO
In the just-concluded Volkswagen Group earnings release week, Volkswagen Group gave an official timeline for Porsche's IPO. "Despite the a lot of uncertainty in the market right now, we expect Porsche to complete such a listing in the fourth quarter of 2022." Volkswagen Group Chief Financial Officer Arno Antlitz said at volkswagen group's 2021 earnings conference.
Regarding Volkswagen's decision, Oliver Blume, Chairman of Porsche's Global Executive Board, said in an exclusive interview with Chinese media on March 18 that "volkswagen group is welcome to study the possibility of an IPO listing of Porsche AG. We believe this will bring a win-win situation for all stakeholders. "In February this year, Volkswagen made sure that The Jet would go public independently, and the two sides have reached a framework agreement, which is expected to give birth to the largest IPO in European history. Arno Antlitz said at the just-held annual meeting that Porsche dominates its segment, with EBIT margins reaching and exceeding 15% over the past few years. Moreover, Porsche has always maintained a certain degree of independence, and at the same time integrated into the Volkswagen Group, contributing to the technological development of the Group, while its production does not occupy the Group's resources. These provide operability for Porsche's separate IPOs.
Figure | Chairman of the Porsche Global Executive Board, Obermou
Porsche's 2021 financial report released on March 18 showed that in FY2021, the Stuttgart-based sports car manufacturer hit record highs in both operating income and sales profit, once again consolidating its position as "one of the most profitable car manufacturers in the world" with outstanding performance. Porsche's operating income climbed to €33.1 billion in 2021, up €4.4 billion from the previous fiscal year and up 15 percent year-on-year. Profit from sales of 5.3 billion euros increased by 1.1 billion euros or 27 percent from the previous fiscal year. As a result, Porsche achieved a return on sales of 16.0% in FY2021 (14.6% in the previous fiscal year).
As Volkswagen's most profitable brand, the positive and negative impact of Porsche's independent listing on the performance of Volkswagen Group has become the focus of attention. According to sources, Porsche achieved a pre-tax gain of 3.4 billion euros in the first three quarters of 2021, accounting for about 34% of the profit of the entire automotive division of the Volkswagen Group. In this regard, Arno Antlitz said that the logic of launching a separate Porsche IPO is that "Volkswagen has a unique market-leading product portfolio and has a technological leadership in many market segments, and we have further consolidated this leading position through the implementation of the NEW AUTO strategy, and we are committed to investing in future technologies." The listing of Porsche may help us to accelerate the implementation of our strategy and give us more flexibility. ”
The NEW AUTO strategy is the Volkswagen Group's strategy for the future of 2030, which was released in July 2021. It aims to accelerate Volkswagen's transformation into a software-driven mobility service provider. Leadership in new technologies, including software and platform integration, is key to achieving this plan. In order to achieve this plan, the public needs to open up new sources of financing. In 2021, although the cost reduction plan initially came into effect, the Volkswagen Group's net cash flow and net current assets have improved significantly. However, R&D costs in the automotive business increased by 12.2% year-on-year to EUR 15.6 billion (FY2020: EUR 13.9 billion), and the R&D expense ratio (R&D costs as a percentage of sales revenue) remained at 7.6%, and in 2022, the R&D expenditure ratio of the automotive business is expected to remain at 7%.
In the past decade, under the impact of the economic crisis and industry competition, multinational car companies, including GM and Ford, have generally implemented the slimming strategy of surviving with broken arms, selling multiple of their brands and derivative businesses to stop losses; FCA and PSA have also sought future development through alliances and in a group-based way. In the past two years, the multinational car giants in the transition period have begun to obtain more financial support from the capital market through spin-off listing, among which Daimler Group has announced at the end of 2021 that it will split its Daimler truck business and list it separately, becoming the third major structural adjustment in Daimler's century-old history. In contrast, Volkswagen, which has 12 brands from 7 European countries, has maintained a large and stable structure in recent years, although it has been plagued by various internal and external crises. However, under the difficult challenge of the comprehensive transformation to electric intelligence, volkswagen also needs more flexibility and faster establishment of new technological advantages.
As for Porsche's ability to absorb money after its listing, Volkswagen Group said that through the pure electric model Taycan, Porsche's electrification strategy has paid off, and in 2021, taycan sales reached 41,296 units, surpassing Porsche's previous best-selling 911 model. "In 2021 Porsche has already shown us that the transition to electrification can be achieved on the basis of a staggering 16.5% profit margin, which lays a good foundation for a potential Porsche listing." Arno Antlitz said, "We can be sure that a potential IPO will enhance the competitiveness of the team and boost everyone's confidence in the future."
The Volkswagen Group said that the industrial cooperation between the two sides will continue, which will also ensure that both Volkswagen and Porsche can continue to benefit from the synergy. According to volkswagen's previously disclosed plan, under the platform strategy. The PPE luxury electric vehicle platform jointly developed by Audi and Porsche will become an important high-end electric vehicle platform under Volkswagen. The Audi FAW BJEV joint venture, which has just started construction in China, will start production of electric vehicles based on the PPE platform. Obomu, Chairman of porsche's Global Executive Board, said that Porsche is also ready internally and has created various favorable conditions for this: strategically, operationally and financially, Porsche is in an excellent position.
Regarding the plausibility of Porsche's IPO, Obermou elaborated on the same logic as Arno Antlitz: "We have a good premise that Porsche maintains a high degree of independence even after integrating into the Volkswagen Group. Through an IPO, Porsche can further enhance its brand image and increase the freedom of the company. In terms of specific operations, Obomu reminded, "In the process of IPO, if Volkswagen wants to fully integrate Porsche, then the holding and income statement transfer agreement will also be terminated." He believes that the Volkswagen Group will also benefit from the listing of Porsche AG, and the IPO will bring more flexibility to the Volkswagen Group and help further accelerate the transformation.
The relationship between Volkswagen and Porsche is a classic business story for the global automotive industry. Since the founders of both brands are Ferdinand Porsche, in this context, since 2007, the relationship between Volkswagen and Porsche has been constantly complicated, after mutual acquisitions and brand mergers, although Volkswagen currently holds 100% of the Porsche Group (Porsche AG), Porsche SE owns 53% of the Volkswagen Group's cars, and the Porsche family has always been in charge of Porsche Holdings, which has also made it maintain its independence in the Volkswagen Group. Therefore, in the eyes of the outside world, Porsche is not a wholly-owned subsidiary of Volkswagen in the strict sense. Therefore, for the possibility of "the public fully integrating Porsche in the process of IPO" mentioned by Obermu, industry insiders believe that there is a possibility, in view of the current complex equity relationship between the two parties, it is not excluded that it may break the cross-holding situation between the two parties. Regardless of the operation, from the information released by both sides, it can be seen that increasing the flexibility of the Volkswagen Group and the freedom of Porsche is the original intention of the two sides.
As for the benefits of Porsche's separate IPO, Obermou added that in principle, the capital market values homogeneous and more focused business units, and the value of large companies is often underestimated, because the individual value of their business units, or the value of sub-brands, has never been reflected 1:1 in the capital markets. "And the higher the company's rating, the greater the space for financing options and the scope of operations." Alliances with tech companies, for example, are helping to increase our speed and agility, and such alliances are becoming increasingly important. Obermu said. At the March 18 earnings conference, Obermou revealed that Porsche had discussed "exciting joint projects" with Apple, but had not yet decided whether to proceed. In 2021, Porsche's investment arm Porsche Ventures has announced an investment in iMaker, a Chinese technology company that provides virtual influencers and digital ecosystems. In the industry's interpretation, Porsche's series of investments in the field of technology will also objectively help its independent IPO.
"The decision on the listing of Porsche AG depends entirely on the Volkswagen Group," said Obermou. Arno Antlitz said at the Volkswagen Group press conference on March 15, "We think that the independent listing of Porsche is a very logical action and will bring great value, so we are evaluating the listing." According to the Domestic Media quoted by the German "Auto Weekly" report, the Volkswagen union said that if the Porsche IPO is successful, employees will receive a bonus of 2,000 euros.
Source: Porsche, Volkswagen, The Economic Observer
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