Volkswagen Profit Climbs On Strong Deliveries

by Ike Obudulu Last updated on May 2nd, 2019,

Wolfsburg, Germany : German automaker Volkswagen Group (VKW.L,VLKAF.PK,VOW.BE) on Tuesday reported higher profit in the first nine months of fiscal 2018 driven by increased deliveries. Further, the company confirmed its fiscal year targets, despite continuously challenging market conditions.

For the year, the sales revenues of the Volkswagen Group and its business areas are intended to grow by as much as 5 percent year-on-year. The company expects that full-year deliveries will continue to moderately surpass the previous year.

For the Group and the Passenger Cars Business Area, the company expects operating return on sales to fall moderately short of the expected range. Adjusted operating return on sales is expected in the range of 6.5 – 7.5 percent in 2018.

Herbert Diess, Chairman of the Board of Management of Volkswagen AG, said, “We are still facing major challenges, that we and the entire automotive sector have to overcome. As we are currently in the midst of a groundbreaking transformation, we have to continue picking up the pace.”

For the first nine months of the fiscal year 2018, profit before tax increased by 2.2 billion euros to 12.5 billion euros from last year. The diesel issue gave rise to special items of 2.4 billion euros, lower than the previous year’s 2.6 billion euros.

Operating profit increased slightly to 10.9 billion euros. At 13.3 billion euros, adjusted operating profit was slightly higher than last year’s 13.2 billion euros. Adjusted operating return on sales stood at 7.6 percent.

Group sales revenue rose to 174.6 billion euros from 170.1 billion euros in the prior-year period.

Volkswagen Group increased deliveries to customers by 4.2 percent year-on-year in the first nine months, despite challenges presented by the WLTP test procedure that resulted in the anticipated temporary third-quarter decline in unit sales particularly in Europe.

The strong development in the first half of the year and during the summer months was able to compensate for September’s decline in deliveries, which was mainly caused by the WLTP transition, Volkswagen said.

FieldsSales revenue at the Volkswagen Passenger Cars brand rose 7.3 percent to 62.5 billion euros. Sales revenue at the Audi brand, including the Lamborghini and Ducati brands, increased slightly.

Sales revenue at ŠKODA rose year-on-year by 2.1 percent. Porsche Automotive’s sales revenue increased due in particular to positive mix effects and higher volumes. Sales revenue for Volkswagen Commercial Vehicles was down 3.9 percent.

In Germany, Volkswagen shares were trading at 144.70 euros, up 4.40 percent.

VW has struggled to adjust to the worldwide harmonized light vehicle test procedure, known as WLTP which took effect last month, resulting in a 3.6 percent decline in deliveries during the quarter as some car models remained unavailable for sale.

The company has been at the center of turmoil in the industry since it admitted to cheating diesel emissions tests three years ago.

The ensuing scandal has cost the leading German carmaker more than 27 billion euros and has seen rules rewritten to try to force companies to produce cleaner vehicles.

Despite the new WLTP rules, VW said it expects new vehicle sales to rise moderately this year, after delivering 10.74 million vehicles to customers in 2017.

VW will seek to cut investment spending and increase efficiency measures by integrating its brands more closely, such as giving Bentley access to electric vehicle technology developed by Audi and Porsche.

VW has wanted to develop autonomous cars in-house, but the carmaker signaled a new openness toward developing the technology with an outside partner to avoid research and development costs spiraling.

“We want to have access to a self-driving system and we are speaking with relevant players. It is very expensive to develop and others are already well advanced. Waymo is one of them,”

Chief Financial Officer Frank Witter said in a conference call with journalists.

VW is also open to cooperating with outside companies on manufacturing battery cells and could be open to sharing its electric vehicles platform MEB with rival Ford (F.N), Witter said, adding that no formal decision has been taken.

“We want to open up much more to cooperations,” he explained, adding that currently the main priority on electric cars technology was to roll it out across VW Group, which includes Skoda and Seat.

This year the group will spend 19.8 billion euros on developing conventional vehicles and engines, while investing only 6.6 billion euros on electric cars, digital services and autonomous driving.

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