Cars, phones resilient to global downturn

Europe's largest car maker and three of the continent's biggest telecommunications companies demonstrate their resilience in the global downturn.

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Europe's largest car maker and three of the continent's biggest telecommunications companies demonstrated their resilience in the global downturn with a series of announcements today of better than expected earnings results. Volkswagen (VW) reported that despite a big drop, it was still making a profit in the second quarter, and growth in emerging markets would help it outperform the industry in the second half. Second-quarter net income fell 83 per cent to €283 million (Dh1.46 billion) from a year earlier, the German car maker said yesterday. Sales slid 7.7 per cent to €27.2bn. VW's first-half worldwide car deliveries dropped 5 per cent, less than the 18 per cent seen in the industry as a whole, as gains in China and Brazil offset falls in European markets such as Spain and the UK. The company, which also makes Skoda and Seat cars, won a battle last week to merge with Porsche after defeating a takeover attempt by the sports car manufacturer. "Volkswagen is feeling the impact of the crisis, no doubt, but they're still performing comparatively well," said Aleksej Wunrau, an analyst at BHF Bank in Frankfurt. "Volkswagen's liquidity is high and inventory cuts were lower than at competitors." VW has a broader international presence than its closest European competitor, Peugeot Citroen of France, which reported a recurring loss and a drop in sales of 14 per cent. VW said its worldwide market share in the period rose to 12 per cent from 9.9 per cent a year earlier. In China, its biggest foreign market, VW's sales jumped 23 per cent, while they were up 7.3 per cent in Brazil. Latin America and Asia were the only two regions where the car maker reported higher deliveries. In the telecoms sector, results were helped by cost-cutting programmes. Telefonica of Spain, Europe's biggest telecoms company, was even slightly upbeat, saying its Spanish business, which accounts for more than a quarter of its revenues and had been a worry for some analysts because of rising unemployment, was showing "signs of stability". Telefonica said first-half net profit rose 0.7 per cent to €3.62bn, with its booming Latin American subsidiaries helping to offset a sagging performance in Europe, while the group cut costs by 4.5 per cent. France Telecom, Europe's third biggest, said net profit for the first half of this year was €2.58bn, down 2.3 per cent over the same period last year. The company said it had seen the signs of a slowdown in activity in the second half because of regulatory decisions, but still expected to hold up well, reaffirming its profit outlook. "We are confident we can adjust to current conditions while preparing to take maximum advantage of the recovery when it occurs," said Didier Lombard, the company's chief executive. In Britain, British Telecom beat estimates with a 3 per cent fall in first-quarter adjusted first core earning and said it had made a good start to its cost-cutting programme. BT's net income in the three months to June 30 was £214m (Dh1.294bn), beating the £118.2m average estimate. * with agencies