Germany’s Volkswagen posts record first half profits, ups forecast

Wolfsburg, Germany (dpa) – Volkswagen posted record first-half operating profits of almost 11.4 billion euros (13.5 billion dollars) on Thursday, shrugging off the effects of the coronavirus pandemic.

Europe’s largest carmaker said the result had been achieved “despite a continuing challenging environment” – a reference to bottlenecks in chip supplies – and following a loss of around 1.5 billion euros at the start of the year.

The first-half operating profits exceed the total for last year, when there was a first-half loss of 1.5 billion euros.

After taxes, profits came in at 8.4 billion euros, by contrast with a loss in the same period last year of more than 1 billion euros.

Turnover rose by more than a third to more than 130 billion euros, boosted by demand previously dammed up by the pandemic and by discounts on electric vehicles partially funded by the state.

Deliveries rose by 28 per cent to more than 5 million vehicles.

Chief executive Herbert Diess said sales of upmarket cars with margins above 10 per cent were going “particularly well.”

The company raised its yield targets for the year, predicting a return before interest and taxes of between 6.0 and 7.5 per cent on turnover, up from an earlier 5.5 to 7.0 per cent.

VW is holding net liquidity of 35 billion euros.

The semiconductor supply problems are expected to dampen growth in the second half, after some hundreds of thousands of vehicles fewer than planned were produced in the first half.

As the global automotive sector represents around 10 per cent of demand for semiconductors, “this should be a manageable problem,” VW said.

In China in particular, the chip shortage persists, with the result that VW has taken a hit to turnover in its most important market.

Restructuring is proceeding with a mix of investment in electric vehicles and networking on one hand and cost-cutting on the other.

A new strategy, entitled New Auto, takes in new platforms for future projects in autonomous driving and mobility services.

VW set aside almost 700 million euros for restructuring in the MAN truck and bus subsidiary and elsewhere. The sale of US utility vehicle maker Navistar was not included in the figures.

As part of the restructuring, the global staff complement fell by 0.4 per cent to 660,000 at the end of last year.

VW’s holding company Porsche SE also raised its predictions for the year, forecasting after-tax profits of between 3.4 billion and 4.9 billion euros, up from the earlier prediction of between 2.6 billion and 4.1 billion euros.