MUNICH - Volkswagen Group’s first-quarter operating profit rose 17 percent, helped by cost cuts at the VW brand, a weaker euro and a profit at Spanish unit Seat. The group's Audi and Porsche brands saw margins shrink on higher investments.
The results provided the automaker with some respite after the unexpected resignation of longtime Chairman Ferdinand Piech on April 25.
Quarterly earnings before interest and taxes increased to 3.3 billion euros ($3.6 billion) from 2.9 billion euros a year earlier, VW said today in a statement.
Operating profit improved to 6.3 percent of revenue from 6 percent. VW stuck to a full-year target range of 5.5 percent to 6.5 percent.
“After a few weeks of boardroom distractions, we think investors will be reminded progress toward VW’s 2018 targets is yet to accelerate,” Michael Tyndall and Kristina Church, analysts at Barclays, said.
The quarterly earnings "will allay some concerns that recent board changes were related to operating conditions," Philip Watkins, a London-based analyst at Citigroup, said in a note.
VW was shaken by Piech's comments earlier this month questioning the authority of CEO Martin Winterkorn and dismissing him as a potential successor as chairman. The attack came without explanation and was followed by behind-the-scenes efforts to oust the CEO.
The automaker didn't address the power struggle in its earnings statement, but Winterkorn, 67, did defend the company's strategy. "We are optimally positioned to master the divergent trends in the global automotive markets," he said in the statement.
Analysts were relieved by signs of progress with the group's modular production strategy which aims to use a core range of components across a wide variety of models. "These are good numbers," Bankhaus Metzler's Juergen Pieper said. "The modular production strategy is progressing and tailwinds may grow over the course of the year," he said, citing positive currency effects and cost savings at the core VW brand.
First-quarter revenue for the 12-brand group rose 10 percent to 52.7 billion euros. VW remained in second place in worldwide deliveries versus Toyota during the quarter, with sales rising 1.8 percent to 2.49 million cars and trucks, compared with a 2.5 percent decline to 2.52 million vehicles at Toyota.
VW also still expects group revenue to exceed last year's record 202 billion euros by as much as 4 percent on continued growth in deliveries.
VW brand profit jumps
First-quarter operating profit at the core VW brand jumped 16.8 percent to 514 million euros as the first returns from a 5 billion-euro efficiency program trickled in. The positive effect of cost cuts was in the low triple-digit millions of euros in the quarter, VW said. Increased volume and the costs cuts offset weak markets in Russia and South America. The brand's operating margin rose to 2.0 percent from 1.8 percent.
Quarterly sales of VW-badged cars in high-margin western European markets rose 6.5 percent to 381,600 vehicles, offsetting declines in the U.S. and even China, a major source of VW profit where the namesake brand achieved double-digit gains in recent years.
“The development of the VW brand will be in focus in coming months,” said Daniel Schwarz, a Frankfurt-based analyst at Commerzbank. “The margin is still pretty weak,” but the overall numbers for the group “look robust,” he said.
Audi's operating profit increased only slightly to 1.4 billion euros from 1.3 billion as higher investments in new products, technologies and new factories weighed on earnings. Operating margin was 9.7 percent, down from 10.1 percent.
Porsche had an operating profit of 765 million euros, up from 698 million, and an operating margin of 15.1 percent, down from 17.8 percent, as increased structural costs and higher development costs hit earnings. Demand for the Macan compact crossover helped the brand's deliveries to surge 32 percent.
The Skoda unit reported an operating profit of 242 million, up from 185 million, bolstered by the revamped Fabia hatchback and new Rapid sedan. Its operating margin rose to 7.6 percent from 6.2 percent.
Seat swung to a 33 million euro operating profit from a 36 million loss in the same quarter last year, helped by the new Leon compact car, as well as more advantageous exchange rates and cost reductions. The result was Seat's first quarterly profit in 7 years.
Bentley's operating profit increased to 49 million euros from 45 million. The brand's operating margin rose to 10.3 percent from 10.0 percent.
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