[Auto] Volkswagen Group raises prospects for 2021 after record first half result

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Link Web: https://www.portalautomotriz.com/noticias/corporativo-e-industria/el-grupo-volkswagen-aumenta-las-perspectivas-para-2021-tras 

 

 

This positive development was driven in particular by the premium brands Audi and Porsche and by Volkswagen Financial Services. The impacts of the Covid-19 pandemic and the global semiconductor shortage were successfully contained. There was strong customer demand for the Group's attractive model range as markets continued to recover. As a result, deliveries increased by 27.9 percent to 5.0 (3.9) million vehicles during the weakest period of the previous year, which was affected by the pandemic. Sales revenue increased even more strongly by 34.9 percent to € 129.7 (96.1) billion. The operating result was 11.4 billion euros (first half of 2020 before special items: –0.8 billion euros), far exceeding the previous record of 10 billion euros (before special items) of the year prior to the crisis 2019, with a strong 8.8 (first semester of 2020 before special items: –0.8 percent).

 

The higher gains were mainly due to higher vehicle sales, improvements in the product mix and prices, as well as positive effects of the valuation of raw material hedges. Extraordinary restructuring expenses of € 700 million had a negative impact. Work on ongoing fixed cost programs was vigorously pursued. The Automotive Division generated a very high adjusted net cash flow of 12.3 (-2.3) billion euros and, therefore, once again demonstrated the great efficiency of its business model. The Division's net liquidity continued to grow to a very strong level of € 35 billion. The acquisition of Navistar and its financial impact are not included in the figures. As a result of extremely good business performance in the first half of the year, the Volkswagen Group has raised its operating performance outlook on sales for the full year 2021 by 0.5 percent, from 6.0 to 7.5 percent.

 

Herbert Diess, CEO of the Volkswagen Group said: “We maintain our accelerated pace, both from an operational and strategic point of view. The record result in the first half of the year is clear proof of how strong our brands are and how attractive their products are. The premium segment performed especially well with double-digit returns, as did Financial Services. Our electricity offensive is gathering momentum and we will continue to increase its pace in the coming months. We are also realigning the company with our new New Auto group strategy so that we can take advantage of future earnings funds. By doing so, we are preparing Volkswagen to play a leading role in the new world of mobility. "

 

Arno Antlitz, Volkswagen Group CFO: “The financial performance of the Volkswagen Group in the first half of the year impressively demonstrates the strength of our company. Our operating return on sales after six months was 8.8 percent. In particular, the second quarter was exceptionally strong. Our net cash flow of € 10.2 billion is also a solid result and was achieved despite our considerable future investments. We have successfully contained the impacts of semiconductor bottlenecks to date, although we anticipate somewhat more pronounced effects in the third quarter. However, our assessment of our business performance for the year as a whole has improved even more, so we have raised our outlook. "

 

Operating business remains strong

In the first half of the year, the Volkswagen Group increased its global deliveries significantly by 27.9 percent to 5.0 million vehicles during the same period last year, which was affected by the Covid-19 pandemic. The world market share of passenger cars declined slightly by 0.2 percentage points to 12.6 percent in the same period. While the Group was able to increase its market share significantly in its local market in Europe and North America, it recently saw declines in China, its largest single market, due to semiconductor bottlenecks.

 

As planned, the Group has further increased the pace of its successful electric offensive. A total of 171,000 fully electric vehicles (BEVs) were delivered worldwide at the end of June, more than double the previous year period (+165 percent). After 60,000 BEV was delivered to customers in the first quarter, that figure increased significantly as planned to 111,000 BEV in the second quarter. The ratio of Modular Electric Drive Toolkit (MEB) -based vehicles to all BEVs was already over 60 percent in the second quarter. BEV's acceleration will accelerate further in the course of the year due to the expanded model range. The Group has also systematically expanded its model portfolio with a Plug-in Hybrid Unit (PHEV), and there is high demand from customers: a total of 171,000 PHEVs were delivered in the first half of the year, more than three times more in the year. period of the previous year (+204 percent).

 

Premium brands Audi and Porsche performed especially strong, posting record deliveries for the first half of the year and double-digit operating performance on sales of 10.7 and 17.6 percent, respectively. Volkswagen Financial Services also performed very well, more than doubling its operating result year-over-year to 2.3 billion euros. Among other things, it benefited from a strong used car business and a positive trend in risk costs.

 

Due to increased vehicle sales and higher demand for higher margin models, the Group's sales revenue increased significantly by 34.9 percent to € 129.7 (96.1) billion. Operating income was 11.4 billion euros (first half of 2020 before special items: –0.8 billion euros), far exceeding the previous record of 10 billion euros (before special items) of the year prior to the crisis of 2019. with a strong 8.8 percent. The higher gains were mainly due to higher vehicle sales, improvements in the product mix and prices, as well as positive effects of the valuation of raw material hedges. Extraordinary restructuring expenses of € 700 million at MAN had a negative impact. Work on ongoing fixed cost programs was vigorously pursued.

 

Earnings before and after taxes also improved significantly to 11.2 (–1.4) billion euros and 8.5 (–1.0) billion euros, respectively. Earnings per preferred share thus reached a solid level of 16.20 euros (–2.33).

 

Automotive Division: Strong cash flow performance further improved, net liquidity increases again
Strong business and cost-cutting measures continued to have a positive impact on financial performance. The reported net cash flow in the Automotive Division was EUR 10.2 (–4.8) billion euros. Adjusted for mergers and acquisitions and cash outflows attributable to diesel, net cash flow was a solid 12.3 (-2.3) billion euros. Therefore, it was around 80 percent higher than the level of the year before the 2019 crisis. Net liquidity in the Automotive Division also showed positive growth again and rose to a very solid level of 35 billion euros. It was 29.6 billion euros at the end of the first quarter. The acquisition of Navistar and its financial impact are not included in the figures.

 

Research and development costs increased to 7.7 (6.7) billion euros due to the necessary future-oriented investments in new models and technologies, as well as software. However, the R&D index fell significantly to 7.2 percent in the current year, following a figure of 8.7 percent in the prior year period that was due to low sales revenue related to the pandemic. Enhanced investment discipline and greater use of the Group's synergies led to significant progress in equity investments. These decreased by 8.5 percent from the prior year period to 3.8 (4.1) billion euros. Consequently, the investment index fell dramatically to 3.5 (5.4) percent, placing it significantly below the level of the pre-crisis quarter in 2019 (4.9 percent).

 

Outlook 2021

Based on business performance in the first half of 2021, the Volkswagen Group is adjusting much of its forecast for core performance indicators.

 

 

The risk of bottlenecks and interruptions in the supply of semiconductor components has intensified throughout the industry. The adverse impact expected as a result will tend to affect the second half of the year. Consequently, the Group is lowering its forecast of deliveries to customers and assumes that, provided the Covid-19 pandemic is successfully contained, in 2021 they will be markedly above the previous year amid continued challenging market conditions. The challenges will arise particularly from the economic situation, the increasing intensity of competition, volatile markets for commodities and currencies, the security of supply chains and the stricter requirements related to emissions. The Volkswagen Group's sales revenue in 2021 is expected to be significantly higher than the previous year's figure. In terms of operating result, the Group anticipates an operating return on sales of between 6.0 and 7.5 percent in 2021.

 

In the Automotive Division, net cash flow is expected to be much stronger than the prior year due to lower cash outflows from diesel and significantly higher M&A effects. This will lead to a very strong increase in net liquidity. The plans are based on the current structures of the Volkswagen Group. The acquisition of all outstanding shares of Navistar International Corporation and the resulting effects on results of operations, financial position and net assets have not been taken into account in the Volkswagen Group forecast.