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Volkswagen Operating Profit Drops as Anti-Pollution Rules Bite

Volkswagen is also still feeling the impact of its 2015 diesel emissions scandal that has rewritten the rules for the car industry in many major markets.

Reuters

Updated:October 30, 2018, 3:48 PM IST
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Volkswagen Operating Profit Drops as Anti-Pollution Rules Bite
File photo of the Volkswagen logo. (Image: Reuters)
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Volkswagen reported a smaller than expected 18.6 percent drop in third-quarter adjusted operating profit, boosting its shares despite weaker vehicle sales tied to the introduction of more stringent anti-pollution rules. The carmaker's adjusted operating profit came to 3.51 billion euros ($4 billion) in the three months through September, better than the 3.21 billion euros predicted in a Reuters poll of banks and brokerages.

It affirmed its target for 2018 operating return on sales before special items at both the group and its passenger cars business area of 6.5 to 7.5 percent. Including special items, such as an 800 million euros fine against VW's premium brand Audi, the adjusted operating margin will fall moderately short of the expected range, it 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," Metzler analyst Juergen Pieper said. Shares in Volkswagen rose 4.9 percent to 149.42 euros in early trade, making them the biggest gainers on Germany's blue-chip DAX index.

Volkswagen has struggled to adapt its fleet to the worldwide harmonised light vehicle test procedure, known as WLTP which took effect last month, resulting in a 3.6 percent decline in deliveries during the quarter as some car models remained unavailable for sale.

Volkswagen is also still feeling the impact of its 2015 diesel emissions scandal that has rewritten the rules for the car industry in many major markets. Analysts at NordLB said the carmaker could still face penalties and fines of up to 20 billion euros tied to its diesel cheating scandal.

NordLB and Metzler reiterated their "buy" ratings on Volkswagen's stock. Despite the new WLTP rules, VW said it expects new vehicle sales to rise moderately this year, after delivering 10.74 million vehicles to customers in 2017.
| Edited by: Abhinav Jakhar
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