PRINCIPLES AND GOALS OF FINANCIAL MANAGEMENT


Financial management at the Volkswagen Group covers liquidity management, currency, interest rate and commodity risk management, as well as credit and country risk management. It is performed centrally for all Group companies by Group Treasury, based on internal directives and risk parameters. The Scania and MAN subgroups are not coordinated centrally for reasons of timing and legal restrictions related to stock exchange law. The integration process for Porsche AG and Porsche Holding Salzburg has not yet been fully completed.

With regard to liquidity, the goals of financial management are to ensure that the Volkswagen Group remains solvent at all times and to achieve an adequate return from the investment of surplus funds. Currency, interest rate and commodity risk management is designed to hedge the prices on which investment, production and sales plans are based using derivative financial instruments. Credit and country risk management aims to use diversification to avoid exposing the Volkswagen Group to the risk of loss or default. To achieve this, internal limits are defined for the volume of business per counterparty when entering into financial transactions. Various rating criteria are taken into account when setting these limits, including the ratings awarded by independent agencies and the capital resources of potential counterparties. The relevant risk limits and the authorized financial instruments, hedging methods and hedging horizons are approved by the Executive Committee for Liquidity and Foreign Currency.

For more information on the principles and goals of financial management, please refer to chapter Financial risks and to the notes to the 2012 consolidated financial statements.

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CASH FLOW STATEMENT BY DIVISION

 

 

 

 

 

 

Volkswagen Group

 

Automotive1

 

Financial Services

€ million

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

1

Including allocation of consolidation adjustments between the Automotive and Financial Services divisions.

2

These relate mainly to the fair value measurement of financial instruments, application of the equity method and reclassification of gains/losses on disposal of noncurrent assets to investing activities.

3

Before consolidation of intragroup transactions: €17,029 million (€17,868 million).

4

These relate mainly to the acquisition of the holding company operating business of Porsche Automobil Holding SE for €4,495 million and the acquisition of the shares in Ducati Motor Holding S.p.A. for €747 million, shares in KPI Polska Sp.z.o.o., Poznan/Poland, and related financial services companies for a total of €254 million, and the shares in MAN TRUCKS India Private Limited, Akurdi/India (formerly: MAN FORCE TRUCKS Private Limited), for €150 million, in each case net of cash and cash equivalents acquired.

5

Net cash flow: cash flows from operating activities, net of cash flows from investing activities attributable to operating activities.

6

Cash and cash equivalents comprise cash at banks, checks, cash-in-hand and call deposits.

Cash and cash equivalents at beginning of period

 

16,495

 

18,228

 

12,668

 

17,002

 

3,827

 

1,226

Profit before tax

 

25,492

 

18,926

 

23,900

 

17,524

 

1,591

 

1,402

Income taxes paid

 

–5,056

 

–3,269

 

–4,514

 

–2,784

 

–542

 

–484

Depreciation and amortization expense

 

13,135

 

10,346

 

9,982

 

7,843

 

3,152

 

2,503

Change in pension provisions

 

95

 

13

 

87

 

8

 

7

 

6

Other noncash income/expense and reclassifications2

 

–13,575

 

–7,164

 

–13,678

 

–7,208

 

103

 

44

Gross cash flow

 

20,090

 

18,853

 

15,778

 

15,382

 

4,312

 

3,471

Change in working capital

 

–12,881

 

–10,353

 

454

 

1,728

 

–13,335

 

–12,080

Change in inventories

 

460

 

–4,234

 

1,044

 

–3,594

 

–584

 

–640

Change in receivables

 

–56

 

–2,241

 

114

 

–944

 

–171

 

–1,297

Change in liabilities

 

–236

 

3,077

 

–627

 

2,698

 

391

 

379

Change in other provisions

 

370

 

3,946

 

57

 

3,712

 

313

 

234

Change in leasing and rental assets (excluding depreciation)

 

–5,606

 

–4,090

 

–232

 

–394

 

–5,374

 

–3,695

Change in financial services receivables

 

–7,814

 

–6,811

 

96

 

249

 

–7,910

 

–7,061

Cash flows from operating activities

 

7,209

 

8,500

 

16,2323

 

17,1093

 

–9,023

 

–8,609

Cash flows from investing activities attributable to operating activities

 

–16,840

 

–16,002

 

–16,455

 

–15,998

 

–385

 

–4

of which: acquisition of property, plant and equipment capitalized

 

–10,493

 

–8,087

 

–10,271

 

–7,929

 

–222

 

–158

development costs

 

–2,615

 

–1,666

 

–2,615

 

–1,666

 

 

acquisition and disposal of equity investments4

 

–4,105

 

–6,388

 

–3,927

 

–6,626

 

–179

 

238

Net cash flow5

 

–9,631

 

–7,502

 

–223

 

1,112

 

–9,408

 

–8,613

Change in investments in securities and loans

 

–2,643

 

–2,629

 

–111

 

–1,285

 

–2,532

 

–1,344

Cash flows from investing acitivities

 

–19,482

 

–18,631

 

–16,565

 

–17,283

 

–2,917

 

–1,348

Cash flows from financing activities

 

13,712

 

8,316

 

2,551

 

–4,267

 

11,161

 

12,583

of which: capital transactions with noncontrolling interests

 

–2,101

 

335

 

–2,101

 

335

 

 

mandatory convertible note

 

2,048

 

 

2,048

 

 

 

Changes in cash and cash equivalents due to

 

–141

 

82

 

–98

 

106

 

–43

 

–24

exchange rate changes

 

1,298

 

–1,733

 

2,120

 

–4,334

 

–822

 

2,601

Net change in cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at Dec. 316

 

17,794

 

16,495

 

14,788

 

12,668

 

3,005

 

3,827

Securities, loans and time deposits

 

14,352

 

12,163

 

8,110

 

8,966

 

6,242

 

3,197

Gross liquidity

 

32,146

 

28,658

 

22,898

 

21,634

 

9,248

 

7,024

Total third-party borrowings

 

–117,663

 

–93,533

 

–12,324

 

–4,683

 

–105,338

 

–88,849

Net liquidity

 

–85,517

 

–64,875

 

10,573

 

16,951

 

–96,090

 

–81,826

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