Volkswagen Earnings Rise 17% Despite Continued Diesel Pressures
Strong global demand for the Porsche Macan SUV helped VW to a profit gain despite ongoing troubles at its core brand. Image source: Volkswagen AG.
Volkswagen (NASDAQOTH: VLKAY) said that its third-quarter operating profit, excluding special items, rose 17% to 3.75 billion euros, despite a 54% decline in operating profit at its core mass-market VW brand.
The key numbers
All financial figures are in millions of euros.
| Metric | Q3 2016 | Q3 2015 | Change (YOY) |
|---|---|---|---|
| Revenue | 51,997 | 51.487 | 1% |
| Worldwide vehicle sales (thousands) | 2,454 | 2,350 | 4.4% |
| Operating profit before one-time items | 3,750 | 3,206 | 17% |
| One-time items | (442) | (6,685) | (93.4%) |
| Net profit (loss) attributable to shareholders | 2,277 | (1,731) | N/A |
| Net liquidity as of Sept. 30 | 31,115 | 27,755 | 12.1% |
Data source: Volkswagen. YOY = year over year.
Volkswagen's profits in the third quarter of last year were wiped out by a one-time charge of 6.5 billion euros related to the diesel emissions cheating scandal.
What happened with Volkswagen this quarter?
A year after the news first broke, Volkswagen continued to feel the effects of its diesel-emissions cheating scandal. VW's operating profit gains were driven by strong results its luxury brands, while its high-volume namesake VW brand suffered.
- Operating profit at the VW brand fell 54% to 363 million euros. VW said the decline was due in part to a brief dispute with suppliers that led to production interruptions in August, and partly due to big increases in sales incentives around the world. VW sold just over 1 million vehicles during the quarter, down 8.2% from a year ago.
- Operating profit at VW's premium Audi subsidiary rose 12.8% to 1.252 billion euros. That gain came on favorable shifts in product mix and exchange rates, as worldwide sales of about 367,000 vehicles were down 1.9% from a year ago.
- Operating profit at VW's luxury Porsche unit rose 21% to 1.026 billion euros, on strong demand for well-optioned versions of the brand's Macan SUV. Global sales of about 60,000 vehicles were roughly flat year-over-year.
VW adjusted its full-year 2016 guidance to reflect a slightly more optimistic overall outlook, but with caveats.
- VW now expects its revenue for the full year to be roughly equal to the 213 billion euros it generated in 2015. It had previously warned that revenue could fall as much as 5%.
- VW said its operating profit margin for the full year could come in at the upper end of its target range of 5% to 6%, excluding the impact of one-time items.
- But Audi warned that its full-year operating margin would be "considerably below" its target range of 8% to 10%, due to costs related to the diesel scandal.
What VW's management had to say
"The figures for the first three quarters show the operational strength of the alliance of brands in the Volkswagen Group", said CEO Matthias Mueller in a statement. "This is a robust base on which we intend to push forward with our planned transformation from car manufacturer to [a] provider of sustainable mobility."
"Despite major challenges and the negative impact of the diesel issue, the Volkswagen Group remains on a solid financial footing," CFO Frank Witter said. "Our net liquidity gives us the financial stability to actively shape the future of mobility while coping simultaneously with the financial repercussions of the diesel issue and the investments and outlay required for CO2 compliance and new technologies."
"But further significant improvements in productivity and profitability are needed across the whole Group," Witter said.
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