Porsche Shareholders Remain Optimistic Despite EUR20 Billion Loss

The recent months have been challenging for major German automotive manufacturers, with significant declines in stock values affecting companies like BMW, Mercedes Benz, and Volkswagen. Among these, Porsche SE, the investment arm of the luxury car manufacturer, reported a staggering loss of EUR20 billion. This raises the question for shareholders: what does this mean for their investments?

Despite the substantial losses, Porsche SE has announced its intention to distribute dividends, albeit at a reduced rate compared to the previous year. Shareholders will receive EUR1.91 per preferred share, down from EUR2.56 in the prior year. This decision, made during a recent financial press conference, reflects the board's optimism for future performance, despite the current financial downturn.

The rationale behind maintaining a dividend payout, even in the face of losses, lies in the board's projection of a profitable year ahead. Porsche SE has set an ambitious target for 2025, aiming for a net profit ranging between EUR2.4 billion and EUR4.4 billion, with analysts leaning towards the higher end of this spectrum. In contrast, the company reported a profit of EUR5.1 billion in 2023.

To ensure long-term profitability and stabilize dividends for shareholders, Porsche SE, along with Volkswagen, has initiated extensive restructuring measures. The CEO of Porsche, Hans Dieter Pötsch, emphasized the importance of implementing these strategies decisively during the press conference.

As part of the restructuring efforts, significant job cuts are on the horizon. Volkswagen plans to eliminate approximately 35,000 positions in Germany, while Porsche is expected to reduce its workforce by 3,900 employees.

In a strategic move to enhance profitability, Porsche SE is also exploring new avenues, including investments in the defense industry. The company is committing substantial resources to the Munich-based firm Quantum, which manufactures aircraft that can be utilized for military purposes. This marks a notable shift in focus for the company, with executives expressing confidence that such investments do not conflict with the ethical standards upheld by Porsche SE. They view these ventures as crucial to supporting democratic values.

In light of a more than 30% decline in profits for 2024, the company is also adjusting employee bonuses, reducing them significantly. This comes as Porsche grapples with the implications of a sharp drop in earnings.

The current financial climate presents a mixed picture for Porsche SE and its shareholders. While the recent losses are concerning, the board's commitment to future profitability and strategic investments offers a glimmer of hope for recovery and continued shareholder returns.