VW remains resilient despite ‘Dieselgate’

In spite of ‘Dieselgate’, Volkswagen Group’s sales for 2015 grew by 5.4 per cent to €213.3 billion. However, due to high extraordinary charges, the Group recorded a consolidated loss before and after tax of €1.3 billion and €1.4 billion, respectively.

On the debit side also, earnings crashed to -€4.1 billion (compared with €12.7 billion in 2014) thanks to “negative special items totalling €16.9 billion.

At €12.8 billion, the operating profit before extraordinary charges was slightly higher than the prior-year figure.

According to VW, the reason for the increase in consolidated sales was due to “improvements in the mix in the automotive business and the strong performance of the Financial Services Division, alongside positive exchange rate effects”.

The largest share of the special items amounting to €16.2 billion comprises provisions for the “emissions issue”, among other things for “pending technical modifications and customer-related measures as well as global legal risks”.

The share of operating profit attributable to the Chinese joint ventures, whose business is not included in the Group’s sales revenue and operating result, marginally exceeded the excellent prior-year figure following a strong fourth quarter and on account of exchange rate effects.

Notwithstanding the doom and gloom surrounding the loss before and after tax, chairman of the board of management, Matthias Müller, declared the Group’s operations are in “great shape, as the figures before special items for the past fiscal year clearly show”,

“Were it not for the sizable provisions we made for all repercussions of the emissions issue that are now quantifiable, we would be reporting on yet another successful year overall,” he said. “The current crisis – as the figures presented today reveal – is having a huge impact on Volkswagen’s financial position. Yet we have the firm intention and the means to handle the difficult situation we are in using our own resources.”

The sale of shares in Suzuki, among other things, have bolstered results, adding a total of €2.8 billion to the Automotive Division’s net cash flow, lifting it to €8.9 billion. Net liquidity in the Automotive Division rose to €24.5 (17.6) billion.

Considering all the circumstances, the board of management and supervisory board clearly wants to be seen to reward nervous shareholders and therefore will propose to the Annual General Meeting of Volkswagen AG on 22 June, 2016 that a dividend of €0.11 per ordinary share and €0.17 per preferred share be paid.

The board estimates Group deliveries to customers in fiscal year 2016 will be on a level with the past year due to volume growth in China.

Depending on economic conditions – particularly in South America and Russia – and the exchange rate development and in light of the emissions issue, the board expects Group sales revenue for the Volkswagen Group may be down by five per cent on prior year.

                                          Prospects for 2016

In the passenger cars business area, VW expects a sharp decrease in sales revenue, with an operating return on sales in the region of 5.5 – 6.5 per cent.

With sales revenue in the commercial vehicles business area likely to remain essentially unchanged, the operating return on sales should be between two and four percent.

VW expects sales revenue in the power engineering business area to be perceptibly lower than the prior-year figure, with a significantly reduced operating profit.

However, for the financial services division, the company is forecasting sales revenue and operating profit at the prior-year level.

“Disciplined cost and investment management and the continuous optimization of our processes are integral elements of the Volkswagen Group’s strategy,” says a company spokesman.

In terms of Group operating profit, the board still expects an operating return on sales of between five and six percent.

The Group’s chief financial officer, Frank Witter, remains bullish about 2016, as a man in his position might be expected.

“This year we are again operating in an exceedingly challenging environment in which global demand for new vehicles is declining, exchange rates and interest rates remain highly volatile and competition in many of our markets is intensifying,” he said. “Added to this is the emissions issue, the extensive clarification of which will also be a dominant feature of the Volkswagen Group’s work in the current year. Regardless of this, we are confident that the Volkswagen Group will make good progress on its chosen path.”

              Volkswagen Group 2015 consolidated financials

January – December		2015	2014	+/– (%)
Volkswagen Group (IFRSs):
Deliveries to customers	‘000 units	9,931	10,137	– 2.0
Vehicle sales	‘000 units	10,010	10,217	– 2.0
Production	‘000 units	10,017	10,213	– 1.9
Employees	Dec. 31	610,076	592,586	+ 3.0
Sales revenue	EUR million	213,292	202,458	+ 5.4
Operating profit/loss	EUR million	– 4,069	12,697
Profit/loss before tax	EUR million	– 1,301	14,794
Profit/loss after tax	EUR million	– 1,361	11,068
Profit attributable to shareholders of Volkswagen AG	EUR million	– 1,582	10,847
Earnings per share (basic)
Ordinary shares	EUR	-        3.20	21.82
Preferred shares	EUR	-        3.09	21.88
Automotive Division (including allocation of consolidation adjustments between the Automotive and Financial Services divisions):
Cash flows from operating activities	EUR million	23,796	21,593	+ 10.2
Cash flows from investing activities
attributable to operating activities*)	EUR million	14,909	15,476	– 3.7
of which investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex)	EUR million	12,738	11,495	+ 10.8
Net liquidity at December 31	EUR million	24,522	17,639	+ 39.0

		2015	2014	+/– (%)
Volkswagen AG (German Commercial Code)
Net loss/net income	EUR million	– 5,515	2,476
Dividend proposal
- per ordinary share	EUR	0.11	4.80
- per preferred share	EUR	0.17	4.86

*Excludes acquisition and disposal of equity investments: €17,270 million (previous year: €15,719 million).