(Adds detail, background, shares)
By Jan Schwartz
BRAUNSCHWEIG, Germany, Feb 27 (Reuters) - The finance unit of Europe's largest carmaker Volkswagen AG said on Thursday it planned to issue more bonds in 2003 and expected to hold profits flat this year despite a weak auto market.
"There will be some more bonds this year," the head of Volkswagen Financial Services, Norbert Massfeller, told Reuters in an interview, adding they would be of a size similar to the 1.5 billion euro seven-year bond it launched in January.
Asked if the first issue could come in the summer, Massfeller said: "That is not speculation I would deny."
VW Financial Services sold 1.5 billion euros ($1.6 billion) in seven-year bonds at the start of the year, just four months after selling a 1.5 billion euro 2008 bond.
Last year, the auto sector was plagued by credit rating downgrades as price wars and pension fund liabilities combined with a weak economy to undermine sentiment.
This year, although auto bonds are expected to continue to be volatile in a weaker car market, some credit analysts estimate that they will account for around a quarter of new euro corporate bond sales in 2003.
VW Financial Services is rated A1 with a stable outlook by Moody's and A+ with a stable outlook by Standard & Poor's.
Volkswagen shares were up 2.84 percent in Frankfurt at 36.25 euros by 1626 GMT, just underperforming a 3.2 percent rise on the DJ European autos index .
FLAT PROFITS
Massfeller also said Volkswagen's finance unit expected to post profits this year at around last year's level even though the market is weak, noting that only around a third of the unit's profits depended on new business.
Leasing deals on cars tend to run for around three years.
Volkswagen Financial Services has not yet detailed results for 2002, although Massfeller said the unit contributed proportionally more to VW's group profits for the year than in 2001, when its pre-tax profit came in at 401 million euros, or around 10 percent of the group result.
The Volkswagen group said earlier this month its core profits slipped 10 percent last year to just under four billion euros. Unlike many of its peers, it has so far declined to give any profit outlook for 2003.
But in addition to the finance unit, two other divisions have also predicted flat profits this year.
The luxury Audi unit, which generated close to a third of group pre-tax profit in 2002, has said it expects stable profits this year, and the group's Skoda brand also said this week it aimed to match 2002's result.