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Volkswagen sees profits jump but warns of challenges ahead

Volkswagen factory Image copyright AP

Volkswagen has reported a sharp jump in annual profits, but warned of tough market conditions this year.

Europe's largest carmaker posted net profits of €10.8bn (£7.8bn) for 2014, up 21% on year earlier, after revenues rose slightly to €202.5bn.

The company said it had hit its targets in what was a "satisfying" year.

But it said it would face "fierce competition" and volatility in exchange rates and raw material prices in the year ahead.

Volkswagen's cautious outlook also focused on developing markets.

"Given the subdued growth prospects in regions outside China, there is no guarantee that 2015 will be a successful year," said finance head Hans Dieter Poetsch.

"Continuing political uncertainty, strong currency fluctuations and tough environments in markets such as Russia and Brazil present major challenges."

Despite the warning, the company said it expected revenue to rise by up to 4% this year.

The downbeat outlook initially pushed Volkswagen shares sharply lower but they bounced back in late trading to close at €221.4, up 1% on the day.

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