Volkswagen profit jumps 40% in Q1

Volkswagen Group said first-quarter operating profit rose 40 per cent even as its vehicle sales declined, a sign that cost cuts are materialising as the automaker pushes to overcome its emissions scandal.

Quarterly group operating profit increased to 4.37 billion euros ($4.77 billion) from $3.41 billion a year ago, VW said on Wednesday. Results were helped by improving cost savings at VW’s troubled core division, the carmaker said, sticking with expectations for the full-year group operating margin to come in between six and seven per cent after 6.7 per cent in 2016.

Group sales revenue rose by 10 percent to $61.33 billion, VW said. The operating return on sales was 7.8 percent, up from 6.1 percent. “Our efforts to improve efficiency and productivity across all areas of the company are paying off,” VW Group CEO, Matthias Mueller said in a statement.

“These quarterly results represent the first tangible results” of Volkswagen’s spending discipline in the wake of the diesel crisis, CFO Frank Witter said in the statement.

VW said the “robust” results were due to volume and mix-related factors, positive exchange rate effects and product cost optimisation, along with an improvement in the VW brand’s earnings, which rose to $948.3 million from $79.6 million a year earlier.

Other group brands had mixed results with the Porsche luxury unit and the Skoda and Seat volume brands posting increases while Audi’s profit fell and Bentley’s loss narrowed.

Audi’s operating profit dropped to $1.31 billion from $1.42 billion as VW’s biggest earnings contributor is pushing new models and technologies. Skoda’s profit rose by 32 percent to $452.2 million while the Seat brand’s profit increased to $61.1 million from $58.9 million.

Bentley’s loss narrowed to $32.7 million from $58.9 million. Improvements in the mix and positive exchange rate effects lifted Porsche Automobile’s operating profit to $1.02 billion from $933.1 million, VW said.
VW brand goal

Investors have said a turnaround at VW’s namesake brand, which traditionally has been saddled with high fixed and r&d costs, is key to turn the automaker into a more appealing business, although VW last year eclipsed Toyota as the world’s biggest selling carmaker.

VW Group’s long-term goal is to lift the brand’s operating profit margin to four percent by 2020 and six percent by 2025 from 1.8 percent last year, still lagging French rivals PSA Group and Renault.