Porsche SE Forecasts Major Non-Cash Impairment in 2024 Financials | Image Source: Www.porsche-se.com
STUTTGART, Germany, 13 December 2024 – Porsche Automobile Holding SE (Porsche SE) announced a significant non-commercial deterioration related to accounting in its consolidated financial statements 2024, mainly with regard to the amounts of its investments in Volkswagen AG and Porsche AG. The deterioration could lead to a negative result of the after-tax group for the financial year, which would result in Porsche SE’s previous profit forecasts being withdrawn from EUR 2.4 billion to EUR 4.4 billion.
The expected deterioration is due to the revised measurement assumptions in the deterioration tests of Volkswagen AG and Porsche AG. The company estimates that the gaps could range from 7 to 20 billion euros for Volkswagen AG and 1 billion euros for Porsche AG. Despite the revaluation, the investment burden will remain significantly higher than their respective market values. Porsche SE stressed that the expected deterioration is purely accounting adjustments and will have no cash impact.
Impact on financial forecasts
By withdrawing its forecast from the group’s result, Porsche SE reaffirmed its expectations for net debt, which is expected to remain between 5 and 5 billion euros at 31 December 2024. The company also assured stakeholders that it remains financially robust and continues to support its core investments in Volkswagen and Porsche. In addition, Porsche SE expressed its intention to distribute dividends for fiscal year 2024 despite the anticipated obstacles.
These deficiencies reflect adjustments based on the expectations of external analysts rather than the approved internal plans of Volkswagen AG and Porsche AG. This approach highlights reliance on third party data for future cash flows under current accounting conditions. Porsche SE reaffirmed its confidence in the long-term potential to improve the value of its core investments and its strategic importance in the wider Volkswagen Group.
History of accounting adjustments
The expected shortfalls result from the absence of approved financial plans for Volkswagen AG and Porsche AG at the time of the deterioration tests. As a result, Porsche SE used market forecasts to assess future cash flows of its core investments. These adjustments are part of the annual accounting procedures to align reported values with external economic conditions and market trends.
Porsche SE has specified that the deficiencies will not affect the operating cash flows and financial guidance provided by Volkswagen AG and Porsche AG for their respective financial years of 2024. This distinction highlights the immutable nature of the adjustments and their limited direct effect on the wider operational performance of Porsche SE subsidiaries.
Porsche SE Strategic Approach
Despite the risk of deterioration, Porsche SE remains committed to supporting the Volkswagen Group’s strategic objectives. The holding company continues to play a key role in promoting long-term growth and innovation throughout its portfolio. Its financial strength allows it to navigate on temporary accounting adjustments while maintaining a stable outlook for shareholder performance.
Porsche SE stressed that its strategic investments in Volkswagen AG and Porsche AG are well positioned to take advantage of the new opportunities for electrification, digitisation and sustainable mobility. These priorities are consistent with the broader transition of industry to environmentally friendly and technologically advanced solutions.
Investor confidence in challenges
While the notice of deterioration may affect investors, Porsche SE’s guarantee of dividend payments and financial stability offer some degree of security. The company’s approach to maintaining a sound financial base reflects its commitment to providing value to shareholders despite short-term accounting challenges.
Analysts suggest that the proactive disclosure of Porsche SE’s deficiencies demonstrates transparency and responsible financial governance. By addressing these accounting adjustments in advance, the company emphasizes its resilience and strategic outlook in the dynamic of the complex market.
As Porsche SE completes its financial presentation by 2024, the expected gaps highlight the changing challenges of aligning accounting practices with market realities. Stakeholders will monitor the company’s performance closely in the coming quarters as it continues to balance strategic investments with fiscal prudence.
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