VW Group’s first half 2016 balance sheet better than expected, profits before ‘dieselgate’ provisions up

The Volkswagen Group has announced its first half of 2016 financial results, and the balance sheet is in “a much better position than anticipated.” Operating profit before special items came to 7.5 billion euros in the six-month period, half a billion more than the first half of 2015. The group delivered 5.12 million vehicles in the first half, a 1.5% year-on-year increase.

The ‘special items’ in question is the money set aside for the ‘dieselgate’ emissions scandal. VW says that this reduced operating profit by 2.2 billion euros, including provisions amounting to 1.6 billion euros. Taking this into account, the group’s operating profit after special items is 5.3 billion euros. At 107.9 billion euros, the group’s sales revenue in the first six months fell slightly short of the previous year’s takings (108.8b).

“Particularly in light of the current special items, we can be satisfied with our results for the first half-year. The figures show that our operating business is sound. With our brands the group is built on many strong pillars. Building on these foundations we will transform the Volkswagen Group with our ‘Together-Strategy 2025′ from a car maker into a world-leading provider of sustainable mobility,” said VW Group chairman Matthias Müller.

VW’s operating profit does not include figures of its Chinese joint ventures, which amounted to 2.4 billion euros in the reporting period, down slightly y-o-y from 2.7b. The group’s profit after tax amounted to 3.6 billion euros, down from 5.7b.

“We produced a solid result in difficult conditions. This shows that the Volkswagen Group has high earnings power. But it will require continued hard work to absorb the significant impact from the diesel issue,” said Frank Witter, the group’s CFO.

The European giant said that its H1 2016 results were not just from the prolonged positive growth of Audi, Porsche and Skoda brands, but also came from a palpable improvement in the namesake Volkswagen passenger car brand in the second quarter of the year. This in turn is attributable to factors such as seasonally strong demand, a recovery of the European car market and the revitalisation of the fleet business.

Despite this, operating profit before special items at the namesake brand declined to 900 million euros from 1.4b, which VW says is due to exchange rates, lower sales volumes and higher marketing costs resulting from the diesel emissions issue.

Other brands are compensating very well. Audi, which figures include Lamborghini and Ducati brands, generated an operating profit before special items of 2.7 billion euros (down from 2.9b), Skoda saw profit rise from 522 to 685 million euros, SEAT saw profit rise by 40 million to 93 million euros, while operating profit at Porsche jumped 7.7% to 1.8 billion euros.

CEO Müller commented on the outlook saying: “We will work hard on our earnings power to manage the future investments needed to transform our core automotive business and build an innovative business unit for mobility services. One pillar of Strategy 2025 is therefore that all brands and business areas contribute to increasing efficiency at every link in the value chain.”

The VW Group expects a 2016 sales revenue decline by as much as 5% over 2015 figures. Dieselgate aside, the highly competitive environment as well as exchange rate and interest rate volatility and fluctuations in raw materials prices are cited as factors. However, positive effects are expected from the efficiency programmes implemented by all brands from the group’s modular toolkits.

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Learn more: Volkswagen Dieselgate