Solid earnings drive VW shares higher
Volkswagen’s shares jumped after its first-quarter earnings beat analysts’ estimates, reassuring investors that it continues to resist the margin problems suffered by western European mass-market rivals.
First-quarter revenues increased 26 per cent to €47.3bn after the carmaker sold 2.2m vehicles in the first three months of the year – an increase of 11 per cent on the same period a year ago.
Operating income rose 10 per cent to €3.2bn, beating an estimate of €2.7bn, compiled from analysts by Bloomberg.
VW reiterated guidance that it plans to sell more vehicles in 2012 than last year, when it delivered 8.3m vehicles to customers, and for operating profit to meet last year’s level.
Martin Winterkorn, chief executive said: “With the first quarter we have had a clearly good start to the year. Our results once again show that we are on the right track.
“I’m still convinced that the Volkswagen Group can approach the coming months with confidence.”
The shares leapt 5.4 per cent to €133.10 on Thursday.
VW’s stable of 11 brands stretches from Skoda, the low-cost carmaker, to Scania, the truckmaker, and Bugatti and Bentley, the luxury marques.
Its broad product portfolio and geographic spread has helped VW avoid the fate of other western European mass-market carmakers that are being squeezed by overcapacity and falling margins.
VW said it delivered 1.2 per cent fewer vehicles to customers in western Europe in the three months than it had in the same period a year ago, outperforming an 8.8 per cent decline in the market as a whole. This meant it gained market share.
VW said: “Our sales figures were down on the previous year in virtually all major markets in this region, apart from Germany and the United Kingdom.” VW passenger car and light vehicle sales in Italy fell 17 per cent and in Spain by 9 per cent. In contrast, car sales in the US, once a weak spot for VW, surged 34 per cent.
VW’s strong earnings came in spite of investments in a new modular platform system designed to cut production costs by increasing commonality among vehicles.
Arndt Ellinghorst at Credit Suisse said the 4.3 per cent profit margin at VW’s passenger car brand was “very impressive”.
“Once more VW underlines that it is currently the most successful mass carmaker globally,” he said.
Net cash at its automotive division declined from €17bn to €15.8bn in the quarter, after VW spent €1.4bn to raise its voting stake in MAN from 59.6 per cent to 70.9 per cent.
Investors have profited from the carmaker’s success as the share price has risen about 15 per cent this year. Yet according to Mr Ellinghorst it remains undervalued compared with its peers. “Management should ask itself why this is the case,” he said.
Fund managers and investor advisory companies last week criticised corporate governance at VW as the carmaker prepared to elect the wife of chairman Ferdinand Piëch, a former kindergarten teacher, to its supervisory board. The move reduced the number of independent board members to just one. Analysts also criticised last weeks’ acquisition of Ducati, calling it a trophy purchase that appeared to have little strategic rationale.