October 30, 2018 09:10 CET
— UPDATED: Oct. 30 10:57 – adds reaction, details
FRANKFURT — Volkswagen Group reported an 19 percent drop in third-quarter adjusted operating profit to 3.51 billion euros ($3.99 billion), weighed down by weaker vehicle sales and headwinds tied to the introduction of more stringent emissions rules in Europe.
However, VW reiterated its goals for the year, as robust results from the Porsche luxury brand helped to stem the fallout from trade tensions, a cooling Chinese market and the new WLTP emission test in Europe that triggered costly production bottlenecks.
“We are still facing major challenges that we and the entire automotive sector have to overcome,” VW Group CEO Herbert Diess said in a news release on Tuesday.
Volkswagen has struggled to ready its models for WLTP introduced in Europe in September, causing production disruption and pricing pressure. This resulted in a 3.6 percent decline deliveries during the quarter as some car models were unavailable for sale. The potential impact on earnings could be more than 1 billion euros.
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VW affirmed its target for 2018 operating return on sales before special items at both the group and its passenger cars business area to come to 6.5 percent to 7.5 percent after 7.4 percent in 2017.
Including special items, such as an 800 million euros fine against VW’s premium brand Audi for diesel violations in Germany, the adjusted operating margin will fall moderately short of the expected range, it said.
VW anticipates revenue growth of as much as 5 percent this year on “moderately” higher deliveries after last year’s record 10.7 million vehicles.
“We fight for each and every customer,” Chief Financial Officer Frank Witter said in an interview with Bloomberg Television. After another weak October in Europe, sales should improve during November and December, while the second-half of the year is developing “exactly as we expected.”
Metzler analyst Juergen Pieper said: “The fact that VW does not have to change its forecast makes it look more robust than most of its competitors, namely Daimler and BMW. It demonstrates VW’s talents in both the product and the cost side.”
VW and rival automakers got a boost Monday in China after Bloomberg News reported that Beijing may halve vehicle sales tax. The incentive would offer a leg up for a critical market as the industry grapples with trade barriers and the shift to electric cars.
German peers Daimler and BMW have both lowered their guidance this year, partly because — unlike VW — they ship many SUVs from the U.S. to China, exposing them to higher import tariffs.
VW is still struggling with the fallout from the diesel crisis that shattered the company more than three years ago. Investigations against current and former top executives are ongoing and lawsuits filed by disgruntled investors and car buyers have only just started.
Analysts at NordLB said VW could still face penalties and fines of up to 20 billion euros tied to the diesel scandal.
Reuters and Bloomberg contributed to this report
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