ii view: Volkswagen does well despite challenging markets

Vehicle deliveries are expected to slow, but can VW's profit still accelerate? 

Nine-month results

• Revenue up by 6.9% to €186.6 billion
• Operating profit before special items up 10% to €14.8 billion

Chief financial officer Frank Witte said:

"The Volkswagen Group achieves a good performance amid a challenging market environment. The performance in the first nine months of the financial year makes us optimistic that we will achieve our full-year targets for 2019."

ii round-up:

The automotive giant whose brands include Audi, SEAT, ŠKODA and Porsche, reported nine-month profits at the upper end of analyst expectations. 

Operating profit climbed 10% to €14.8 billion, aided by improvements in the mix and price positioning of its core Volkswagen (XETRA:VOW) brand, and compensating for lower sales. Higher customer demand for its Tiguan, Touareg and Atlas models contributed. 

Sales of both SEAT and ŠKODA increased by 15.3% and 11.8% respectively over the period while sales for Porsche rose by 7.7% worldwide. 

Looking forward and despite gains in market share, management anticipates that vehicle markets will contract faster than previously anticipated in many regions of the world. As such, it now expects deliveries to customers in 2019 to be on a level with the previous year, down from a previous slight improvement. 

However, full-year guidance for revenue and profit growth were maintained, with the share price rising marginally in early European trading. 

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 overhangs. 

For investors, these broadly positive results contrast with those recently reported at rival Ford (NYSE:F). The emissions scandal appears to be largely in the rear-view mirror, while its basket of brands helps even out the ups and downs of each. 

Positives: 

• Basket of brands helps even out the ups and downs of each
• It recently confirmed plans to extend its alliance with Ford

Negatives:

• Air quality concerns and taxation changes have led to falls in diesel sales
• Growing intensity of competition

The average rating of stock market analysts:

Buy