The Prague Post
http://www.aaaradiotaxi.cz/index.php?xSET=lang&xLANG=2
July 20th, 2008
Endowment Fund     Book of Lists ONLINE      Reservations      Classifieds    Subscriptions
Prague accommodation
Prague Art & Antiques Prague Art Prague Antiques

Home » Archives » Business

Crown deflates Škoda's profits

Despite exporter worries, automaker takes in stellar returns

By Michael Heitmann
Staff Writer, The Prague Post
March 19th, 2008 issue

Škoda Auto posted record-breaking profits in 2007, but the Volkswagen-owned automaker could have done even better if not for the rapid and largely unexpected appreciation of the crown.
In 2007, the country’s largest car maker saw its revenues grow 9 percent from 2006, to 222 billion Kč ($13.7 billion); the company’s pretax profit reached 19.9 billion Kč, up 39.9 percent year on year.
While Škoda will continue to make sure that sales and manufacturing volumes continue to grow, “the rest [of the company’s financial performance] will depend on the exchange rate because that is the main influence regarding revenue,” CEO Reinhard Jung told reporters March 13.
Jung said that, only half a year ago, Škoda had expected the crown to be in the range of 26 to 27 Kč per euro. In recent weeks, the crown has dived below 25 Kč to the euro, with the crown’s strength costing the company 40 million euros ($62 million/1 billion Kč) in foreign exchange losses, Jung said.
“We will have to review and see. … It’s getting worse for us every day,” he told Thomson Financial.
Škoda is the most prominent exporter to be worried about the crown’s rise, a concern very much shared by its smaller peers. Jiří Grund, head of the Czech Exporters Association, warned recently that a further strengthening of the crown would be “murderous and devastating” for the economy.
Next Finance analyst Markéta Šichtařová is nonplussed by Grund’s fears.
“If the strengthening of the crown was devastating the economy, both export volume and industrial output would decline,” she said. On the contrary, exporters have full order books despite the crown, she added.
Petr Mach, executive director of the Center for Economics and Politics, does not see signs that the exchange rate has taken too much of a toll on exports.
“The strengthening crown reflects investors’ and tourists’ interest in the Czech Republic as well as Czech exporters’ successes,” he said.
Euro adoption would clearly give exporters more security, Šichtařová said. But it would hit consumers’ pockets, and they can’t defend themselves as loudly as organized exporters, she said.
Raiffeisenbank analyst Aleš Michl has a more positive view of Europe’s common currency.
“Euro adoption is clearly advantageous to exporters. There is no doubt about that,” he said. First, it’s time to put the house in order. “Unless we repair the fiscal budget first, the euro will be a plus for export but put the economy as a whole at risk.”

Michael Heitmann can be reached at mheitmann@praguepost.com


Other articles in Business (19/03/2008):

Browse the Current Issue

If you enjoyed this article, why don't you subscribe to the print version!
We accept secure online transactions provided by PayPal and Moneybookers

Be the first to add a comment!


Full Name: *
City: *
E-mail: **
This comment can be published in the print version of The Prague Post
Enter the text on the right:
 visual captcha
Comment: *
* Required field. In order to be approved for display, comments must have a first and last name and a city.
** E-mails are required and will only be used for internal purposes.

Most visited in Book of Lists

Hotel booking
The Prague Post Online contains a selection of articles that have been printed in
The Prague Post, a weekly newspaper published in the Czech Republic.
To subscribe to the print paper, click here.
Unauthorized reproduction is strictly prohibited.