Volkswagen Group logs 8.8% jump in 2014 operating profit

Article by Christian A., on March 1, 2015

Volkswagen Group posted an 8.8-percent rise in operating profit to EUR12.7 billion ($14.25 billion) in 2014, boosted by double-digit sales surges by its Audi and Porsche units. Group sales revenue jumped 2.8 percent to EUR202.5 billion while operating margin leaped from 5.9 percent to 6.3 percent. VW Group logged a 21-percent rise in profit after tax to EUR11.1 billion.

The auto division saw its net cash flow surge by EUR1.7 billion to EUR6.1 billion. Its net liquidity also climbed from EUR16.9 billion to EUR17.6 billion. Despite that, the group gave a warning that certain challenges this year might hamper its growth as well as of the auto industry.

Chief Financial Officer Hans Dieter Poetsch said in a statement that continuing political uncertainty, strong currency fluctuations and tough environments in markets like Russia and Brazil are the major challenges that the carmaker and the auto industry has to face this year.

For 2015, VW is expecting an operating return on sales of between 5.5 percent and 6.5 percent, saying that geopolitical risks and dropping demand in key markets may affect its business. Notwithstanding that, VW is expecting higher revenues this year, forecasting a climb up to 4 percent from the figure in 2014.

As for deliveries for all the brands under its umbrella, VW Group is expecting a moderate increase this year, although it has said remarked that it is bracing for a tough 2015 after sales at its namesake brand – which accounts for around 60 percent of group deliveries – drop for a fourth month in January.

Metzler Bank automotive analyst Jürgen Pieper remarked that VW Group’s outlook is very conservative and is almost identical to its forecast in 2014, noting that currency markets are more positive last year and the demand is better.

Frank Biller, an analyst at LBBW, remarked that it is important to know how VW’s operations in China developed in the fourth quarter. VW Group is now focusing to improve its profit while increasing its spending on development of electric vehicles and digital features.

With trimmed costs and improved productivity at the core VW brand, chief executive Martin Winterkorn expects to boosts group earnings by EUR5 billion by 2017.

Bernd Osterloh, VW’s labor chief, remarked in January that VW could further save by increasing the number of components shared between vehicles.

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