Volkswagen sees double-digit growth as . . .

Volkswagen Group has reported improved sales and earnings in the first six months of the year in a very challenging environment.

Sales revenue rose by 10.1 per cent to EUR 108.8 billion (EUR 98.8 billion) in the first half of the year, primarily due to exchange rate effects and an improved product mix.

Operating profit before special items grew by 13.0 per cent to EUR 7.0 billion (EUR 6.2 billion). Restructuring measures in the trucks business led to an operating profit after special items of EUR 6.8 billion (EUR 6.2 billion). The operating return on sales remained stable at 6.3 per cent (6.3 per cent).

The Group claims that at EUR 2.7 billion (EUR 2.6 billion), the share of operating profit attributable to the Chinese joint ventures was level year-on-year in the first half of 2015.

The Volkswagen Group’s profit before tax remained almost level at EUR 7.7 billion (EUR 7.8 billion) despite the negative effects from fair value measurement in the financial result. Profit after tax remained unchanged as against the prior-year period, at EUR 5.7 billion (EUR 5.7 billion).

The Automotive Division’s net cash flow increased considerably year-on-year to EUR 4.8 billion (EUR 2.9 billion) thanks to the Group’s robust business model. Net liquidity in the Automotive Division amounted to EUR 21.5 billion at the end of June (end of December:  EUR 17.6 billion).

The Automotive Division’s investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex) increased to EUR 4.7 billion (EUR 3.6 billion).

The Group says it maintained its “disciplined approach” to investment with a ratio of capex to sales revenue in the Automotive Division of 4.9 percent (4.1 per cent). The Group invested primarily in production facilities and in the models to be launched in 2015 and 2016, as well as in the ecological focus of the model range.

                                          Brands and business fields

Global new passenger car registrations increased between January and June 2015. However, trends in the individual regions were mixed. While growth was driven by the Asia-Pacific, North America and Western Europe regions, new passenger car registrations in South America and Eastern Europe saw declines, some of which were severe.

Operating profit at Volkswagen Passenger Cars rose to EUR 1.4 billion (EUR 1.0 billion) due to sales revenue and cost optimization, as well as positive exchange rate effects. Although the markets in South America and Russia were negative factors, there were positive effects from the efficiency program. The operating margin amounted to 2.7 per cent (2.1 per cent).

As the Group’s profit cow, Audi’s operating profit rose to EUR 2.9billion (EUR 2.7 billion) due to sales growth and positive exchange rate effects; its operating margin amounted to 9.8 per cent (10.0 per cent). High upfront investments in new products and technologies, as well as the expansion of the international production network, weighed on earnings.

Operating profit at ŠKODA increased to EUR 522 million (EUR 425 million), mainly due to mix effects, more favourable exchange rates and lower material costs. The operating margin was 8.1 per cent (7.1 per cent). Interestingly, the brand has just sold more than one million vehicles, the first time in its history. Some 24 years ago, when VW took a 30 per cent stake the company made 172,000a year.

The SEAT brand continued its growth trend, lifting its operating profit to EUR 52 million (previous year: operating loss of EUR 37 million). This was primarily due to higher volumes, positive exchange rate effects and cost optimization.

Bentley generated an operating profit of EUR 54 million (EUR 95 million) due to lower vehicle sales and higher up front expenditures.

As the Group’s second biggest profit generator, Porsche’s operating profit improved to EUR 1.7 billion (EUR 1.4 billion) and the brand’s operating margin was 15.7 per cent (17.1 per cent). Positive volume and exchange rate effects more than offset the negative impact of changes in the mix, increased structural costs and higher development costs.

Volkswagen Commercial Vehicles, which is in the process of renewing its product range, managed to hold station and posted an operating profit of EUR 268 million (EUR 280 million). The operating margin, like that of Porsche, slipped, this time to 5.1 per cent (5.9 per cent).

Scania generated an operating profit almost on a par with ŠKODA reporting a figure of EUR 503 million (EUR 476million) and an operating return on sales of 9.7 per cent (9.4 per cent). MAN recorded an operating profit before restructuring expenses of EUR 185 million (EUR 222 million). Again, MAN’s operating return as a per cent of sales slipped, this time to 2.8 per cent (3.3 per cent). Restructuring measures resulted in special items of EUR – 170 million.

Operating profit at Volkswagen Financial Services amounted to EUR 970 million (EUR 776 million). Its operating return on sales was 7.5 per cent (7.4 per cent). The number of new contracts signed worldwide rose by 6.4 per cent year-on-year to 2.5 million.

                                      

                                              New product initiatives

Prof. Dr. Martin Winterkorn, chairman of the board of management of Volkswagen AG, believes the Group is well positioned for the future.

“We offer a comprehensive range of attractive, environmentally friendly, cutting-edge, high-quality vehicles. The Volkswagen Group’s brands will press ahead with their new product initiatives in 2015, modernizing and expanding their offering by introducing new models.”

The Volkswagen Group expects that deliveries to customers will remain on a level with the previous year in 2015 in a persistently challenging market environment. Depending on economic conditions, 2015 sales revenue for the Volkswagen Group and its business areas is expected to increase by up to four percent above the prior-year figure.

However, economic trends in Latin America and Eastern Europe will need to be continuously monitored in the Commercial Vehicles/Power Engineering Business Area.

In terms of the Group’s operating profit, Volkswagen continues to anticipate an operating return on sales of between 5.5 per cent and 6.5 per cent in 2015. Volkswagen expects the operating return on sales to be in the 6.0 per cent to 7.0 per cent range in the Passenger Cars Business Area, and between 2.0 per cent and 4.0 per cent in the Commercial Vehicles/Power Engineering Business Area. For the Financial Services Division, Volkswagen is forecasting an operating profit at the prior-year level.