ii view: Volkswagen bucks the trend

Unlike rivals, Volkswagen is growing profit and taking action in a fiercely competitive industry.

First-half results

• Deliveries to customers down 5.4%
• Revenue up 4.9% to €125.2 billion
• Operating profit before special items up 1.9% to €10.0 billion

Guidance:

Continues to expect customer deliveries in 2019 will be slightly higher than in 2018 despite challenging market conditions. Sales revenue to be as much as 5% higher than in 2018.

ii round-up:

Volkswagen (EURONEXT:VWA) comprises 12 brands from seven European countries: Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN. It has over 120 production plants globally. 

Volkswagen said in March it would remove up to 7,000 jobs by 2023. That's on top of a 2016 job reduction deal that foresaw the loss of 23,000 jobs through 2020, and the addition of 9,000 via new technology.

It recently confirmed plans to extend its alliance with Ford (NYSE:F) beyond a cooperation on commercial vehicles and into European electric vehicles.

The car maker has just reported improved first-half results. Despite reduced deliveries, profits rose on increased demand for higher-margin SUVs and the absence of the emissions fine taken this time last year. 

Porsche sales proved a particular success, while Bentley moved back into profit. Meanwhile, sales of Skoda rose by just under 11%.

ii view:

The last few years have been tough for VW. Damage to its reputation following the emissions scandal has been considerable. Fellow car maker Tesla (NASDAQ:TSLA) has also asked questions of the broader industry regarding prospects for electric cars. Donald Trump potentially turning his attention to trade tariffs on the European Union also remains an overhang.

However, positive half-year results allow a sigh of relief, and the emissions scandal appears to be largely in the rear-view mirror. A broad spread of brands helps smooth out the ups and downs of each, and restructuring is now a positive catalyst.

Positives: 

• Basket of brands spreads risk
• New plan to extend alliance with Ford

Negatives:

• Air quality concerns and tax changes hit diesel sales
• Increased competition

The average rating of stock market analysts:

Buy