Operating profit of German carmaker Volkswagen plummets by more than 80 pct in Q1

Source: Xinhua | 2020-04-30

Operating profit before special items of Volkswagen "decreased significantly" by 81.4 percent year-on-year to 0.9 billion euros (0.98 billion U.S. dollars) in the first quarter (Q1) of 2020, while car deliveries decreased by 23 percent to 2 million vehicles, the German carmaker announced on Wednesday.

"The global COVID-19 pandemic substantially impacted our business in the first quarter," stated Volkswagen's chief financial officer (CFO) Frank Witter. In Q1 2020, earnings before tax fell from 4.1 billion euros to 0.7 billion euros.

Sales of Volkswagen passenger cars, the German carmaker's highest selling division, declined by 16 percent to 765,000 cars while subsidiary Audi recorded a decrease of roughly 12 percent to 268,000 sold vehicles in Q1.

Sales declined in particular in the Asian Pacific region, shrinking by 33.6 percent year-on-year. In Volkswagen's biggest single market China, sales decreased by 35.2 percent to 945.305 vehicles. In Volkswagen's domestic market Germany, vehicle sales recorded a decline of 15.3 percent.

Volkswagen subsidiary and sports car manufacturer Porsche still sold 56,000 vehicles between January and March and only recorded 1.3 percent fewer vehicle sales than a year before. Although there had been cost increases, exchange rate effects and a drop in vehicle sales, "the mix developed favorably."

For 2020 as a whole, Volkswagen expects vehicle deliveries to be "significantly below the prior year due to the impact of the COVID-19 pandemic." Challenges would also arise "particularly from the increasing intensity of competition, volatile commodity and foreign exchange markets and more stringent emissions-related requirements."

According to Witter, Volkswagen had taken "numerous countermeasures to cut costs and ensure liquidity" and would "continue to be robustly positioned financially." Overall, Volkswagen expects operating profit for 2020 to be "severely below the prior year, but still to remain positive."

Volkswagen, like its competitors Daimler and BMW, had to shut down operations in factories and car dealerships for several weeks due to the risk of infection and a lack of supplies from interrupted supply chains. Since last week, German carmaker production in Germany had been starting up again slowly, but initially at lower capacity.

"The gradual restart, also of our factories outside of China, has begun," commented Witter, stressing that "the health of our employees and suppliers remains the clear priority here." According to Witter, Volkswagen "is steering through this unprecedented crisis with focus and determination."

Following the announcement, Volkswagen was among the winners of the German DAX index of Germany's 30 largest listed companies, growing by 2.6 percent on Wednesday morning.