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Cayenne sales lift Porsche profits

Sales of the Cayenne sports utility vehicle boosted revenues from August to November.
Sales of the Cayenne sports utility vehicle boosted revenues from August to November.

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STUTTGART/FRANKFURT (Reuters) -- German sports car maker Porsche said on Wednesday that sales and revenues would rise this business year after strong growth in the first four months, sending its shares surging.

The world's most profitable car maker said sales of its one-year-old Cayenne sports utility vehicle had boosted revenues from August to November to 1.92 billion euros ($2.29 billion), up 47 percent from a year ago.

Porsche shares, which have outperformed their European peers so far this year, were up 3.3 percent at 453.20 euros by 0955 GMT, compared with a one percent gain in the sector index.

"What you can see from these figures is that the Cayenne is supporting falling sports car sales," said Georg Steerers, auto analyst at HBO in Munich, who rates the stock a "buy."

Compared with many other auto stocks, Porsche was still a good bet due to its strong financial's and overall robust sales even in an economic downturn, he added.

Sales jumped 50 percent to 22,016 vehicles in the first four months of the fiscal year, despite flagging sports car demand.

Porsche also forecast higher unit sales and revenues for the full year, helped by a cheaper version of the Cayenne, and repeated it expected a "high level of earnings" this year.

"I feel quite confident and optimistic in my assessment of the 2003-2004 year of business," Chief Executive Wendell Wiedeking told reporters at a news conference.

The Stuttgart-based group posted a ninth straight year of record earnings for the year ended in July, with pre-tax profit rising to 933 million euros ($1.12 billion), but it has not said whether it expects that will stretch to a 10th.

Finance Chief Holger Haerter has said he would be happy for Porsche to achieve flat profits this fiscal year as sales of its traditional 911 and Boxster sports cars weaken and spending increases as it works on next-generation models.

But Wiedeking struck an upbeat note.

"We have done our homework for the future, with our model range for years to come already in place. This puts us in the fortunate position of being able to launch the appropriate model into the market within very short notice.... And mark my words, we still have some surprises up our sleeves," he said.

A German bank said in a research note the momentum of the first four months was unlikely to continue for the full year, as last year's comparison base will get stronger. The bank expects stable margins this year.

"With top line momentum strong we expect to see continued earnings growth in 2003/4," said the bank.

The Cayenne -- a two-tonne off-roader that marked a radical departure for the firm -- has saved Porsche from lower sales and earnings over the last year. But some industry experts wonder if the Cayenne could in the long run damage Porsche's valuable brand image, built on race-winning sports cars.

Especially risky could be the new lower-powered version of the Cayenne with a V6 engine from Volkswagen, which will cost 40,900 euros before tax. But Porsche signaled it is not neglecting its sports cars by spicing up the range with a "550 Spyder," to be shown at the Detroit motor show in January.

Industry experts say Porsche is also close to building a fourth model, a new four-seater coupe or sports sedan, and investors and enthusiasts are eager for details.

Porsche, which sells about half its cars in the United States and has one of the highest hedging levels in the industry to shield it from the currency fluctuations, said it was hedged against the dollar up to and including 2006/07.

It added it was hedged at higher rates for this fiscal year than last and this would contribute substantially to profits.

The strong euro against the dollar, which makes exports to the U.S. expensive, has hit auto stocks this year, and, although useful in the short term, some investors worry that such conservative hedging is expensive to maintain in the long run.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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