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VW posts $12.2B profit in show of pandemic resilience

Christoph Rauwald
Bloomberg

Volkswagen AG said a robust sales recovery toward the end of the year helped cushion annual results from the effects of the pandemic.

Operating profit before one-time items related to VW’s diesel-emissions scandal fell to about 10 billion euros ($12.2 billion) last year, VW said in a statement, from 19.3 billion euros in 2019. Automotive net cash flow shrunk by almost half to about 6 billion euros.

Robust demand in China, VW’s largest market, helped the German manufacturer rebound from the coronavirus outbreak that sparked the most widespread shutdown of global car production since World War II. Although global vehicle deliveries fell 15% to 9.3 million, VW emerged with a small gain in market share as some peers took a bigger hit.

The namesake VW brand broke even last year, with the group’s premium-car units helping to bolster earnings, a spokesman said by phone. The company said last month it plans to hammer out a deal with unions by the end of the first quarter to reduce fixed costs 5% by 2023. Material costs are to be lowered 7% in the next two years.

In this Wednesday, Aug. 1, 2018 file photo, the logo of Volkswagen is seen on top of a company building in Wolfsburg, Germany.

Transition year

VW shares reversed earlier losses, rising more than 4% in Frankfurt trading to their highest in a year. The automaker will report detailed full-year earnings and provide guidance for 2021 at the end of next month. Its truck unit Traton SE said separately Friday that unit sales and revenue improved in the last three months of the year from the third quarter.

“Although VW had already disclosed a strong year-end in pre-close calls with analysts, the magnitude of the beat is welcome and supportive of upcoming full-year results across the industry,” Jefferies analyst Philippe Houchois said in a note to clients. The positive surprise might include benefits from derivative accounting, he said.

VW said in November it expects a “transition year” as the pandemic continues to weigh on operations and warned it might not return to pre-crisis financial planning before 2022. The first weeks have already proven challenging for the industry, with a global shortage of semiconductors disrupting manufacturing at VW and several peers. Coronavirus restrictions in key markets including the U.K., Germany and France also continue to weigh on demand.

Chief Executive Officer Herbert Diess is making an aggressive push into electric cars to challenge Tesla Inc., which became the world’s most valuable auto manufacturer by far last year. The namesake VW brand will roll out the ID.4 compact sport-utility vehicle, and the group’s Porsche and Audi luxury brands will expand offerings of their Taycan and e-tron model lines.

“We argue that in 2021, VW will rival Tesla as the No. 1 seller of battery-electric vehicles globally,” Timm Schulze-Melander, an auto-industry specialist at Redburn, said in a note Friday. He estimates the group will ship as many as 800,000 fully electric cars to customers, up from 231,000 last year. Tesla narrowly missed its target of 500,000 global deliveries in 2020.