Volkswagen logs 26% drop in Q1 operating profit to EUR 2.34 billion

Article by Anita Panait, on April 26, 2013

Volkswagen Group recorded a 26-percent slide in operating profit (earnings before interest and taxes) in the first quarter of 2013 to EUR2.34 billion ($3.05 billion) from EUR3.17 billion in the same period in 2012. The decline in operating profit was mainly attributed to lower demand in Europe as well as to investments on new vehicles.

VW likewise posted a 1.6-percent drop in revenues and 38-percent slide in net income to EUR1.95 billion. The German carmaker reaffirmed its March 14, 2013 targets to match the record operating profit of EUR11.5 billion posted in 2012 and to boost sales and deliveries to new record levels. VW said it is now bracing for increasingly tougher rivalry amid a difficult market environment in Europe.

The German carmaker said that it is not “completely immune” to the intense competition and the impact it has on business. The VW Group includes 12 brands from luxury brands Audi, Porsche and Bentley to volume carmakers VW, Skoda and Seat.

VW chief executive Martin Winterkorn remarked in a statement that as they, expected, business in the first quarter was dominated by the “difficult economic environment.” He remarked that the markets, particularly Europe and Germany, were sluggish. He expressed confidence that VW can “pick up speed over the rest of the year."

Daniel Schwarz, an analyst at Commerzbank, remarked "VW booked significant costs -- like the ones incurred for new-generation Skoda Octavia and the modular toolkit system -- in the first quarter of 2013 that should lead to sequentially rising cost advantages. Volkswagen saw its global deliveries surge by 0.2 percent in March month 864,400 vehicles as demand in North America and China offset slumping sales in Europe.

In 2012, the Volkswagen Group posted increases in terms of vehicle sales, revenues, operating profit and profit after tax, compared to respective figures in 2011. In terms of sales, the Volkswagen Group sold 9,333,559 units in the full year 2012, compared to 8,361,294 units in the entire 2011. This represents an increase of sales of around 11.8 percent.

This huge surge in sales allowed the Volkswagen Group to post a 20.9 percent hike in revenues in 2012. Group revenues jumped from EUR159.34 billion in 2011 to EUR192.68 billion in 2012. With this increase, the Volkswagen Group saw its operating profit hike by 2.1 percent from EUR11.27 billion in 2011 to EUR11.51 billion in 2012.

Overall, the Volkswagen Group posted EUR21.89 billion in profit after tax in 2012. This represents a jump of 38.5 percent over 2011, when the group record EUR15.8 billion in profit after tax.

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