VW Profits, Forecasts Reassure Investors.
But As Dieselgate Noise Abates, Anti-trust Worries Loom.
Volkswagen’s financial results won’t be keeping investors awake at nights, although they might be getting the jitters about other things.
Typical reaction to VW’s second quarter results were remarks like “All Quiet on the Western Front” (Bernstein Research), “No drama is a welcome change for VW” (Citi Research), “Just in line” (Macquarie Research).
VW’s earnings before interest and tax (EBIT) advanced in the quarter to €4.55 billion from €1.90 billion a year earlier, helped by cost cutting and higher-margin new vehicles at the core VW brand. There were no further provisions from dieselgate, for which VW has set aside €22.6 billion so far to cover fines, compensation and vehicle recalls.
According to Macquarie, VW lifted its forecast for the year for revenue growth to “more than 4 per cent” from a previous “up to 4 per cent” increase. The operating margin target remains between 6 and 7 per cent.
Bernstein Research said VW’s results didn’t look like they were from a company under pressure.
“This is a company that many would argue is still in crisis. But you wouldn’t guess it from these Q2s, bar the huge cash outflows for regulatory fines and recalls. Even with these payments, the balance sheet remains robust,” Bernstein analyst Max Warburton said.
Citi Research said the results were as expected and forecasts were largely unchanged. But it worried about the implications of the cartel accusations which surfaced last month from Der Spiegel.
Bernstein’s Warburton wondered if VW shares were now “investable”.
“These results will lend weight to the argument that VW has survived the diesel scandal and can now progress. But we still see multiple issues ahead: post-Piech (former chairman), internal politics, management instability, legal wrangling over the infamous Jones Day diesel report, potential European diesel recall costs and now a possible anti-trust investigation,” Warburton said.