The Volkswagen Group recorded a substantial impact on its business as a result of the global Covid-19 pandemic following the first three months of the current fiscal year. Deliveries to customers decreased by 23.0 percent compared to the same period of the previous year to 2.0 (2.6) million vehicles. Sales revenue fell by 8.3 percent from January to March to EUR 55.1 (60.0) billion. Operating profit before special items decreased significantly by 81.4 percent to EUR 0.9 (4.8) billion. In the previous year, special items as a result of the diesel crisis reduced profit by EUR –1.0 billion. There were no special items in the first quarter of 2020. The operating return on sales in the first quarter of 2020 was 1.6 percent (6.4 or 8.1 percent before special items). In addition to the fall in unit sales due to the drop in customer demand, turbulence in the commodity and capital markets caused the fair value measurement of commodity hedges to have a negative effect and also led to negative currency effects. Earnings before tax fell to EUR 0.7 (4.1) billion.
Frank Witter, member of the Group Board of Management responsible for Finance and IT, said, “The global Covid-19 pandemic substantially impacted our business in the first quarter. We’ve taken numerous countermeasures to cut costs and ensure liquidity and we continue to be robustly positioned financially. The gradual restart, also of our factories outside of China, has begun. The health of our employees and suppliers remains the clear priority here. In Germany, the dealers have reopened since last week. We have thus taken initial steps together to get the business up and running again. The Volkswagen Group is steering through this unprecedented crisis with focus and determination.”
Operating profit expected for full year
The Volkswagen Group expects deliveries to customers in 2020 to be significantly below the prior year due to the impact of the Covid-19 pandemic. Challenges will also arise particularly from the increasing intensity of competition, volatile commodity and foreign exchange markets and more stringent emissions-related requirements. Sales revenue of the Volkswagen Group in 2020 is expected to be significantly below the prior s year’s level as a result of the Covid-19 pandemic. Overall, the Volkswagen Group expects operating profit for 2020 to be severely below the prior year, but still to remain positive.
Despite countermeasures, the R&D ratio and the ratio of capex to sales revenue in the Automotive Division are expected to be above the previous year’s level in 2020 due to lower demand and therefore falling sales revenues. In view of the lower customer demand, further payouts in relation to the diesel crisis and cash outflows from mergers & acquisitions, net cash flow for 2020 is expected to be below the prior-year figure. As a result, net liquidity in the Automotive Division will also fall short of the previous year’s level. We expect lower return on investment (ROI) than in the previous year due to earnings-related factors and do not expect to achieve our targeted minimum required rate of return on investment of 9 percent.
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SOURCE: Volkswagen
