Key Takeaways From Volkswagen AG’s Q1 Results

by Trefis Team
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Volkswagen AG (OTCMKTS: VLKAY) reported first-quarter results on April 26 and presented a steady head-start to the year. The company reported almost a 4% year-on-year (y-o-y) increase in its revenue, backed by higher sales volume. However, earnings per share declined by almost 3% y-o-y predominantly impacted by a change in the company’s reporting of its valuation of derivatives. The company’s superior results again depicted that the emission scandal has not impacted its revenues and growth.

Volkswagen’s performance release depicts that its total deliveries to customers increased by 7.4% y-o-y and total sales volume increased by 6.1%, despite a slight production volume decline of -0.4%. The company benefited from a strong demand from both developed and developing economies, with the global demand from the passenger car market increasing by 2.4% in the first-quarter of 2018. The company’s passenger car deliveries increased by 8% y-o-y in its first-quarter.

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The company’s decline in earnings was a resultant factor of a change in the company’s reporting of its valuation of derivatives. Additionally, a lower capitalization ratio for development costs had a negative impact on the company’s bottom line. As a result of the aforementioned factors, the company’s operating margin declined by 0.60% y-o-y, despite higher volumes and an increase in sales revenue. The passenger car remained the most profitable segment for the company, with a reported operating margin of 7.6% (a decline by 0.9% y-o-y).

The company has a modest outlook for 2018 and expects sales revenue to grow by 5% y-o-y. The management expects the global economy to grow at a weaker rate with additional risks arising from protectionist tendencies, turbulence in the financial markets, and from structural deficits in individual countries. Operating margin is expected to range between 6.5–7.5% in 2018, close to its 2017 figure.


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