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VW, Thanks To Audi, Porsche, Raises Profit By More Than Fifth

But VW Brand Profit Languishes; Is It MQB Or Foreign Exchange?

Volkswagen improved profit in the first quarter by more than 20 per cent thanks to its Audi and Porsche subsidiaries, but the basic VW brand barely kept in the black.

VW’s operating profit, or earnings before interest and taxes (EBIT), rose 22 per cent compared with the same period in 2013 to €2.86 billion. Revenues rose nearly three per cent to €47.8 billion.

Bernstein Research analyst Max Warburton described the results as average, with good and bad points.

“A poor VW brand margin of 1.8 per cent, troubles in BRI (Brazil, Russia, India) markets with Brazil down 20 per cent, excessive reliance on Audi and Porsche and zero free cashflow. VW needs to resume earnings growth to outperform (the stock market). With a European recovery gathering pace and VW China flying, we believe that’s possible this year,” Warburton said.

Audi and Porsche provided nearly 70 per cent of EBIT.

Warburton said the 1.8 per cent profit margin for VW brand underlines lack of progress towards the long-term target of six per cent, although he was unable to say whether this due to lack of success with the MQB production cost saving project, or foreign exchange problems in emerging markets.

“VW brand needs to make a better margin than this to convince the market it is on track, although it’s worth noting that it’s already making now what (Peugeot-Citroen) is hoping to make in 2018,” Warburton said.

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