Volkswagen Overcomes Scandals With Strong Quarter – Forbes
Volkswagen’s operating profit more than doubled to €4.5 billion in the second quarter of 2017, mainly driven by a boost in its European sales. This strong performance came despite its “dieselgate” scandal and, more recently, the allegations of collusion with other German car makers. With this, Volkswagen rounded up the first half of 2017 on an extremely successful note. Its first half operating profit reached almost €9 billion, reflecting 18% y-o-y growth. The drivers of this growth were positive effects from higher volume and mix improvement, as well as the fact that there was a special items expenditure to the tune of €2 billion last year, which was missing this time. In terms of markets, Western Europe, Central, and Eastern Europe continued their strong performances, while there were improvements in North and South America.
Volkswagen Revised Its Outlook Upward In View Of Its Recent Performance
The company registered revenues of around €116 billion (excluding the Chinese joint ventures) reflecting around 7% y-o-y growth. This was mainly due to the positive impact of the volume and mix adjustments. The equity result primarily contributed by the Chinese joint venture was slightly below the last year at €1.6 billion, but excluding the sale of LeasePlan in Q1 2016, then the overall trend was positive.
However, there was a significant negative cash flow of €4.8 billion due to the dieselgate issue in which the company is currently mired. Cash outflows so far this year stand at a total of €12 billion. Excluding the dieselgate-related outflows, the cash flow from operating activities stood at almost €14 billion for the first six months of 2017.
In light of the recent performance, the company now expects its revenues for 2017 to grow by more than 4% over last year’s record €217 billion. Earlier it had said that its revenues are expected to grow up to 4% y-o-y compared to the 2016 levels.
Despite Industry Slowdown, Volkswagen’s Growth Continued
Though the global car market had been growing this year, its growth rate decelerated in Q2. Though regions such as Western Europe, Asia-Pacific, Brazil, and Russia were key contributors to growth, the slowdown in markets such as the U.K. and the U.S. dampened the overall growth in Q2. Despite all this, Volkswagen still improved its sales, especially in Q2.
The first half of 2017 saw Volkswagen deliver 5.2 million vehicles, 0.8% y-o-y growth. June was a particularly successful month for the company, with 920,700 Group vehicles being delivered, a y-o-y rise of 4.2%. The stable growth in its core regions gives Volkswagen’s management the confidence that this impressive growth streak will continue in the second half of 2017.
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