The FINANCIAL — The Volkswagen Group finished the first half of the current fiscal year in a much better position than anticipated. Operating profit before special items came to EUR 7.5 billion in the six-month period (previous year: EUR 7.0 billion). The Volkswagen Group therefore turned in a strong performance in the first half of 2016. However, negative special items in this period reduced the operating profit by EUR 2.2 (0.2) billion, mainly due to legal risks resulting from the diesel issue, for which additional provisions amounting to EUR 1.6 billion were recognized in the first six months of the year. As a consequence, the Group’s operating profit after special items decreased to EUR 5.3 billion. The operating return on sales in the Group declined to 4.9 (6.3) percent; before special items it was 7.0 (6.4) percent. At EUR 107.9 (108.8) billion, the Group’s sales revenue in the first six months fell slightly short of the prior-year figure.
Matthias Müller, Chairman of the Board of Management of the Volkswagen Group, commented on the interim results in Wolfsburg: “Particularly in light of the current special items, we can be satisfied with our results for the first half-year. The figures show that our operating business is sound. With our brands the Group is built on many strong pillars. Building on these foundations we will transform the Volkswagen Group with our ‘Together -Strategy 2025’ from a car maker into a world-leading provider of sustainable mobility.”
The Group’s operating profit does not include the proportionate operating profit of the Chinese joint ventures, which amounted to EUR 2.4 (2.7) billion in the reporting period. These companies are consolidated using the equity method and are therefore reflected solely in the financial result. Owing to the lower investment income and remeasurement effects, profit before tax in the first half-year declined to EUR 4.8 (7.7) billion. Profit after tax amounted to EUR 3.6 (5.7) billion, according to Volkswagen.
“We produced a solid result in difficult conditions,” said Frank Witter, the Group’s Chief Financial Officer. “This shows that the Volkswagen Group has high earnings power. But it will require continued hard work to absorb the significant impact from the diesel issue.”
The results for the first half-year were based in more than just the prolonged positive growth for the Audi, Porsche and ŠKODA brands; they also resulted from a palpable improvement in the Volkswagen Passenger Car brand during the second quarter compared with the first three months of the year. This in turn is attributable to factors such as seasonally strong demand, a recovery of the car market in Europe and the revitalization of the fleet customer business. The efficiency program also had a positive effect here.
Net liquidity in the Automotive Division rises to EUR 28.8 billion
Net liquidity in the Automotive Division rose to EUR 28.8 billion at the end of June, up EUR 4.3 billion on the 2015 year-end figure. Capital expenditure in the Automotive Division decreased by EUR 137 million to EUR 4.5 billion, putting the ratio of capex to sales revenue in the Automotive Division at 4.9 percent, the same figure as in the prior-year period.
Brands and Business Fields
Operating profit before special items of the Volkswagen Passenger Car brand declined to EUR 0.9 (1.4) billion. This is due to exchange rate and mix effects in addition to lower sales volumes and higher marketing costs resulting from the emissions issue.
Audi generated an operating profit before special items of EUR 2.7 (2.9) billion. Exchange rate effects and continuing high upfront expenditures for new products and technologies and for the expansion of the international production network had a negative impact on earnings. The financial key performance indicators for Audi also include the Lamborghini and Ducati brands.
ŠKODA’s operating profit improved by 31.2 percent to EUR 685 (522) million, mainly on the back of positive volume and mix effects as well as optimized product costs.
The SEAT brand continued its strong performance and lifted its operating profit by EUR 40 million to EUR 93 million, with cost reductions and mix improvements compensating for negative volume and exchange rate effects.
The Bentley brand saw its operating profit slide by EUR 75 million to EUR –22 million, primarily due to changed market conditions and unfavorable exchange rates.
Porsche’s operating profit improved by 7.7 percent to EUR 1.8 billion on the back of a year-on-year increase in unit sales as well as exchange rate effects. Demand increased for the Boxster, Cayman, 911 and Macan models.
At Volkswagen Commercial Vehicles, the Caddy and Multivan/Transporter models were very popular in the first six months of the year. Operating profit in the first half-year rose to EUR 299 (268) million year-on-year as a result of mix effects.
At Scania, rising sales figures in Europe made up for the decline in demand in South America, Turkey and Russia, boosting the operating profit before special items to EUR 550 (503) million.
In spite of the persistently difficult economic climate in South America, MAN’s operating profit before special items rose to EUR 186 (54) million. The structural changes introduced also had a positive effect here.
MAN Power Engineering generated an operating profit of EUR 103 (135) million in the first six months of the year.
Volkswagen Financial Services increased its operating profit by 2.6 percent to EUR 995 million. Volume effects had a positive impact: the number of new contracts rose worldwide by 15.2 percent year-on-year to 3.3 million.
In Wolfsburg, CEO Matthias Müller commented on the outlook saying, “We will work hard on our earnings power to manage the future investments needed to transform our core automotive business and build an innovative business unit for mobility services. One pillar of Strategy 2025 is therefore that all brands and business areas contribute to increasing efficiency at every link in the value chain.”
The Volkswagen Group expects that depending on the economic conditions and the exchange rate development and in light of the emissions issue, sales revenue for the Group in 2016 may be down by as much as 5 percent on the prior-year figure. In addition to the emissions issue, the highly competitive environment as well as exchange rate and interest rate volatility and fluctuations in raw materials prices all pose challenges. Positive effects are expected from the efficiency programs implemented by all brands and from the modular toolkits.
In terms of the Group’s operating profit before special items, an operating return on sales of between 5.0 and 6.0 percent is anticipated for 2016.