Principles and goals of financial management
The Porsche AG Group’s financial management covers the management of market, credit and default risks as well as liquidity management. The Porsche AG Group Treasury performs and organizes the financial management for all group companies centrally, based on internal guidelines and risk parameters. The goal of financial management is to ensure that the Porsche AG Group remains solvent at all times and, at the same time, to generate an adequate return from the capital investment of surplus funds. Financial instruments are used to limit the financial risk exposures and to ensure the Porsche AG Group’s solvency, continuing existence and its earnings power. All financial transactions are based on the needs of the underlying transaction and are not entered into for speculative purposes.
Management of market risk
The purpose of managing market risk is to minimize or eliminate the risks arising from fluctuations in currencies, interest rates and commodity prices to which the Porsche AG Group is exposed as a result of its business activities. The aim is both to increase the planning certainty of the Porsche AG Group and to limit the impact on consolidated profit. This is achieved by using non-derivative and derivative financial instruments.
Furthermore, the management of market risk includes the capital investment of surplus liquidity in investment funds, which are subject in particular to share and bond price risk, which can result from fluctuations in stock market prices, stock market indices and market interest rates. These risks are generally countered by the Porsche AG Group by ensuring a broad diversification of products, issuers and regional markets when investing funds.
In some cases, the risk management systems in place define minimum values and exchange rate hedges are entered into when market conditions are appropriate.
In order to fund the pension plans, contributions are made regularly to a separate pool of assets administered in trust, segregated by company and commitment. These are currently invested primarily in investment funds. In order to manage the market risk of the plan assets, these are subject to the capital investment policies within the framework of the trustors’ investment guidelines. In addition, asset-liability management studies are conducted if required so as to ensure that the capital investment is in line with the obligations that need to be covered. Further information on the pension plans and similar obligations can be found in the notes to the consolidated financial statements. → Notes to the consolidated financial statements – 26. Provisions for pensions and similar obligations
In addition, the financial services segment is exposed to residual value risks from the leasing business, where the market price of used cars is the key risk variable. Operational risk management is provided via ongoing monitoring of the development of used vehicle prices by means of data available outside the company, among others. Residual value forecasts are used to check the appropriateness of the loss allowance and the residual value risk potential. Sensitivity analyses are used to quantify the effects of changes in used car prices.
Management of credit and default risk
The purpose of managing credit and default risk is to limit the financial loss from unpaid receivables. To this end, the Porsche AG Group applies a multi-layered checking and risk management process. Before claims arise against contractual partners, the respective Porsche company carries out a credit check using a rating and scoring system and clear checking procedures. In addition, the portfolio is measured on an ongoing basis and taken into account when recognizing loss allowances in accordance with IFRS 9 in order to identify any increasing probability of default at an early stage. Intensive receivables management with active reminders further reduces the probability of default.
The maximum credit risk is also limited by the collateral held, such as vehicles, collateral assignments, guarantees and cash collateral.
Credit risk also arises from investing surplus liquidity or entering into derivatives. To manage these risks, the Porsche AG Group only enters into contracts that contain counterparties, instruments and volumes that have been reviewed and approved in advance.
Liquidity management
The purpose of liquidity management is to ensure the solvency and refinancing of the Porsche AG Group at appropriate conditions at all times. Sufficient liquidity is ensured by means of rolling liquidity planning, a liquidity reserve, confirmed credit lines and by taking out loans. A revolving credit line of €2,500 million from 21 banks secures the liquidity position further.
The Porsche AG Group mainly generates funds through its business operations, external financing and the securitization of receivables. The funds are chiefly used to finance net working capital and capital expenditure and to cover the finance requirements of the leasing and sales financing business. Operational liquidity management uses cash pools in which material cash and cash equivalents are pooled on a daily basis. Such a cash pool is in place with the Volkswagen Group. This enables liquidity surpluses and shortfalls to be controlled in line with requirements. The maturities of financial assets and financial liabilities as well as forecasts of cash flows from operating activities are included in short and medium-term liquidity management.
More information is provided in the notes to the consolidated financial statements on the hedging policy, hedging guidelines, credit and liquidity risks as well as the quantification of the aforementioned hedging activities and the market risk within the meaning of IFRS 7. → Notes to the consolidated financial statements– 36. Financial risk management and financial instruments
Net assets
At the end of the reporting period, the Porsche AG Group reported total assets of €53,527 million, that is a 6.1% increase compared to December 31, 2023.
Intangible assets increased from €8,554 million to €8,941 million. The increase was largely attributable to capitalized development costs.
Property, plant and equipment increased by €654 million to €10,048 million compared to 2023. The increase primarily resulted from additions to furniture and fixtures, plant and machinery and land and buildings, while advance payments made and assets under construction decreased. Leased assets increased by €1,202 million to €5,393 million compared to 2023. This item includes vehicles leased to customers under operating leases.
Non-current and current financial services receivables increased from €6,345 million to €6,886 million. These mainly include receivables from finance leases as well as receivables from customer and dealer financing. The number of financing and leasing contracts increased in the past fiscal year.
Equity-accounted investments, other equity investments, other financial assets, other receivables and deferred tax assets increased overall from €3,592 million in the prior year to €3,780 million.
Investments accounted for at equity include additions of €188 million, with higher offsetting subsequent measurements resulting in an overall decrease of €24 million to €627 million.
The increase in other financial assets of €78 million was due to the acquisition of shares in new investments, with impairments due to subsequent measurements and disposals due to reclassifications to investments accounted for using the equity method having the opposite effect.
In total, non-current assets increased by €2,832 million to €33,239 million. Non-current assets expressed as a percentage of total assets amounted to 62.1% (2023: 60.3%).
Compared to the prior year, inventories increased from €5,947 million to €6,130 million as a result of prepayments made under inventories. By contrast, there was a decrease in inventories of vehicles built up in the prior year in connection with the market launch of the Cayenne.
Current other financial assets and other receivables decreased by €826million to €3,712million. The reduction mainly related to receivables from loans, marking derivative financial instruments to market and trade receivables. By contrast, there was an increase in miscellaneous financial assets and other receivables.
Securities and time deposits as well as cash and cash equivalents increased by €704 million to €8,349 million compared to 2023.
As of December 31, 2024, the equity of the Porsche AG Group increased by €1,388 million to €23,056 million compared to the figure from December 31, 2023. Profit after tax led to an increase in equity of €3,595 million, while other comprehensive income, net of tax, led to a decrease in equity of €116 million. Within other comprehensive income, net of tax, the decrease was mainly due to the measurement of derivative financial instruments through other comprehensive income, while effects from currency translation as well as the remeasurement of pension plans, net of tax, led to an increase.
Dividend payments of €2,101 million, which were resolved by the Annual General Meeting of Porsche AG on June 7, 2024, caused equity to decrease.
Pension provisions decreased by €241 million in the fiscal year 2024 compared to the comparative period of 2023. The decline is due in particular to allocations made to external plan assets. It is also due to the change in the discount rate for domestic pension obligations from 3.2% to 3.4%. This was partly offset by the decrease in current service cost.
Furthermore, non-current other liabilities increased by €535 million to €4,894 million compared to December 31, 2023. In total, non-current liabilities increased by €917 million to €16,128 million. Non-current liabilities expressed as a percentage of total capital amount to 30.1% (2023: 30.2%).
