Emerging markets boost VW profits Volkswagen's operating profit last year surged by more than half to a record €11.3bn as rapid sales growth in emerging markets supported its aim to become the world's biggest carmaker by sales. The carmaker's sales topped 8m for the first time last year, as Chinese demand contributed to a worldwide unit sales increase of almost 15 per cent. VW, whose stable of brands includes Audi, Skoda and Bentley, has defied a bleak environment for rival European mass-market carmakers by strongly increasing sales in emerging markets and retaining cost-efficiency through large manufacturing scale. However the carmaker has cautioned that 2012 will be a "very challenging year" because of the risks in the European market. Its implied €2.28bn fourth-quarter operating profit, as roughly calculated by Reuters, fell narrowly short of analysts" expectations of €2.38bn. The operating profit of €11.3bn was an increase from €7.1bn last year, matching the average compiled from analysts by Bloomberg. The stock slipped 0.2 per cent to €138.85, having gained more than 20 per cent since the start of the year. VW is embarking on an ambitious overhaul of its manufacturing plants and model platforms to drive efficiency improvements that can support a target of 10m unit sales by 2018, which may help it overtake General Motors as the world's largest carmaker. VW last year added MAN, the German truckmaker, to its portfolio of brands that already includes a majority stake in Sweden's Scania, as it attempts to build a European trucking group to rival Daimler and Volvo. VW clinched a 55.9 per cent stake in MAN via a tender offer and may have continued to buy shares since in the truckmaker. VW's cash pile declined from €21bn to €17bn in the fourth quarter due to approximately €7bn in equity investments last year that included the MAN shares and the €3.3bn acquisition of Porsche Holding Salzburg, the car trading company. VW last year abandoned a plan to merge with the Porsche holding company and is now evaluating other ways to create an integrated car group so it can achieve further synergies. The two carmakers already have a significant level of co-operation. Analysts believe the most likely outcome is that VW would buy the 50 per cent of the sport car making operations that it does not already own. However, because this could result in about a €1bn tax liability, VW's board is thought to be considering other ways to achieve its goal. Pre-tax profits at VW doubled last year to €18.9bn due to a multibillion-euro book gain on the options to buy the remaining half of Porsche's sports car operations. The gain was realised after the merger plan was suspended. Net profit more than doubled from €7.2bn to €15.8bn, while earnings per ordinary share jumped from €15.17 to €33.10. The board proposes to increase VW's dividend to €3 for ordinary shares and €3.06 per preferred share. The company is due to publish detailed results on March 12.