SUVs, cost cuts help Volkswagen

Sales of sports utility vehicles (SUVs) and cost cuts helped Volkswagen (VW) shrug off a 1 billion euro legal charge and meet first-quarter operating profit forecasts on Thursday, sending its shares 3.3 per cent higher.

Earnings before interest and taxes (EBIT) fell to 3.9 billion euros ($4.37 billion) from 4.2 billion a year earlier but were in line with the 3.92 billion euros expected by analysts.

Analysts praised Volkswagen’s strong EBIT results at a time when other carmakers and suppliers were cutting their outlook. “The comparison to other companies like Daimler which posted a 30 per cent drop in adjusted operating profit, is impressive,” Metzler analyst Juergen Pieper said.

VW said it expects its return on sales for its passenger cars business to be at the lower end of its 6.5 per cent to 7.5 per cent margin target for the year but analysts were impressed that VW reiterated the goal.

VW’s Bentley unit reversed losses, the carmaker said.

Volkswagen stuck to its forecast of higher unit sales, revenue growth of up to 5 per cent this year, and for a group operating return on sales of 6.5-7.5 per cent.

Ongoing supply bottlenecks caused by difficulties getting cars certified for stricter emissions tests, as well as economic weakness in China, South America and Russia, and legal issues pose risks to VW Group’s business, the carmaker said.

The company set aside 1 billion euros for additional legal risks from its diesel emissions cheating scandal.

VW said the provisions are not related to prosecutor charges filed last month against former VW CEO Martin Winterkorn and four other VW executives who are accused of fraud for failing to report systematic emissions cheating.

Reuters