FRANKFURT (Dow Jones) -- Porsche Automobil Holding SE Wednesday reported net profit fell sharply in its fiscal first half and it repeated its forecast for a loss for the year, but it slashed its net debt largely due to the proceeds from an investment in its core sports car operations by Volkswagen AG.

Porsche said its net debt at Jan. 31 had fallen to EUR6.1 billion from EUR11.4 billion on July 31, 2009, the end of its fiscal year, when Porsche bid to gain control over Volkswagen backfired amid tightening credit markets.
Volkswagen in December acquired a 49.9% stake in Porsche core sports car operations through a capital increase as part of a complex merger under Volkswagen leadership that is expected to be finalized in 2011.
Porsche pocketed EUR3.9 billion from Volkswagen investment in the company, which it used mainly to redeem bank liabilities.
Stuttgart-based Porsche said net profit in the first half of the fiscal year fell to EUR957 million from EUR5.5 billion a year earlier.
The company repeated its forecast for a loss for the year in the “low single-digit billion-euro range” due to accounting effects, such as the deconsolidation of Volkswagen.
Porsche had to fully consolidate Volkswagen in its balance sheet after increasing its voting stake beyond 50% on Jan. 5, 2009. In the second half, Porsche earnings will be further burdened by a capital increase at Volkswagen that will dilute Porsche holding.
Revenues at Porsche core operations rose 3.7% to EUR3.16 billion, while sales declined 1.7% to 33,670 vehicles.
The car maker expects a rise in full-year car sales, driven chiefly by the launch of the new four-door Panamera coupe.
Porsche swung to a EUR4.4 billion pretax loss in fiscal 2009 due to a write-down related to cash-settlement options on Volkswagen shares.
It had reaped huge windfall profits over the valuations of the those options since 2005 when it started building up its Volkswagen stake, but as its net debt climbed investors increasingly questioned Porsche ability to exercise those options and eventually the deal collapsed.
Porsche earnings have also been hurt by hidden reserves and liabilities identified in the course of the purchase price allocation for the shareholding in Volkswagen.
In fiscal 2008, Porsche recorded pretax profit of EUR8.6 billion.
At 1034 GMT, Porsche shares traded down EUR0.64, or 1.5%, at EUR43.13.