Volkswagen rode the sales of its highly profitable SUV line-up to a strong Q1 earnings result.
Despite taking a $1.2 billion charge to account for the continuing fallout from its emissions scandal, Volkswagen AG hit its target for first-quarter earnings before interest and taxes of $4.4 billion.
Sales revenue of the Volkswagen Group rose 3.1% year-on-year to EUR 60 billion in the first three months of the current fiscal year.
“The Volkswagen Group is once again off to a good start this year,” said Frank Witter, chief financial officer of Volkswagen AG. The sales revenue performance and earnings growth in the first three months of the current fiscal year are encouraging.”
The German automaker met its forecast numbers due to the strong sales of its ever-growing line-up of sport-utility vehicles as well as a staunch cost-cutting program. The $1.2 billion charge is just part of the $30-plus billion the company has spent on fees, fines and other costs related to its emissions scandal from 2015.
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VW CFO Frank Witter said the company enjoyed a strong first quarter, which is encouraging for the rest of 2019.
VW officials were quick to note that the extra money is unrelated to prosecutor charges against former VW CEO Martin Winterkorn and four other VW executives accused of fraud for failing to report the emissions cheating.
Earnings before interest and taxes (EBIT) fell to 3.9 billion euros ($4.4 billion) from 4.2 billion a year earlier but were in line with the 3.92 billion euros predicted by analysts. The company’s luxury brands, Porsche and Audi, kicked in on the profits, the company noted, accounting for about 40% of group EBIT.
While the company was pleased by the rise in SUV sales, passenger cars fell during the first quarter and are expected to remain down. Passenger car sales fell 3% to 2.55 million vehicles during the quarter, with sales of the VW brand down 4.5%.
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The company is also facing ongoing bottlenecks due to problems getting its vehicles emissions-legal certifications due stricter emissions tests. Volkswagen is best-selling automaker in China, which is experiencing softness in the market. Other slow markets for the automaker include South America and Russia, the carmaker said.
Volkswagen's passenger cars, like the 2019 VW Jetta, saw sales drop in the first quarter.
Despite this, the company is sticking to its forecast range for passenger vehicle sales increases, and at the lower end of the 6.5% to 7.5% margin target for the year. Volkswagen is also sticking to its forecast of higher unit sales, revenue growth of up to 5% this year, and for a group operating return on sales of 6.5-7.5%, the company noted.
VW plans to launch almost 70 new electric models by 2028, according to recent statement from the automaker, with plans to be leader of the industry’s shift to zero-emissions driving following the 2015 scandal over its cheating of U.S. diesel emissions tests.
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