Volkswagen Reports Upbeat Earnings Despite Emissions Scandal
Volkswagen AG (OTC:VLKAY) on Wednesday confirmed its outlook for the full year and reported a sharp rise in first-quarter profit despite the ongoing fallout from its emissions-cheating scandal.
The German car giant said net profit for the period rose 45% to EUR3.35 billion ($3.66 billion), boosted by cost cutting and higher margins at its VW brand. Adjusted operating profit, which strips out one-off items, gained 27% to EUR4.4 billion. Revenue rose 10% to EUR56.2 billion. The numbers are in line with preliminary figures released last month.
The company's robust earnings come as it continues to grapple with the emissions scandal--where it admitted to installing software in millions of cars over a decade that allowed vehicles to dupe emissions test. The revelation plunged the company into crisis in 2015 and led to penalties, fines and compensation payments of nearly $25 billion.
The scandal still lingers, with the company as recently as last month ordered by a U.S. federal judge to pay a $2.8 billion criminal fine.
Nevertheless, Volkswagen reaffirmed its forecast of a 4% rise in full-year revenue and said it expected to achieve an operating profit on sales of between 6% and 7% this year. In 2016, the company reported revenue of EUR217 billion.
However, the fallout from the diesel scandal is beginning to hit Volkswagen's cash resources. In the first three months of the year, Volkswagen reported net cash outflows of EUR2.6 billion in the automotive division. As a result, the division's cash flow declined by about EUR3.9 billion from the previous year. Net cash on the company's balance sheet remained strong at about EUR23.6 billion at the end of March.
Chief Finance Officer Frank Witter said the diesel crisis would result in a cash outflow in the "double-digit billion euro range" in 2017.