ii view: Volkswagen profit almost doubles

Most of the numbers look good, but shares for this major automaker are down over 15% year-to-date. We assess prospects. 

Full-year results to 31 December 2021

• Revenue up 12% to €250 billion
• Operating profit up 99% to €19.27 billion 

Chief financial officer Dr. Arno Antlitz said:

“Over the past two years, we have learned to better mitigate the impact of crises on our company. I am confident that we will make the best possible use of these experiences to stay on track in these difficult times. 

“In 2021 we enhanced our overall robustness by achieving better margins, reducing overhead costs, lowering our break-even and keeping capex discipline. Our rewards were solid results and cash flows. At the same time, we made no compromise when it comes to future investments and moved ahead in becoming a sustainable, software-driven mobility provider.”

ii round-up:

Automotive giant Volkswagen (XETRA:VOW) reported a near doubling in annual profit, helped by higher vehicle prices and a more favourable product mix.

Operating profit rose 99% to €19.27 billion, although accompanying outlook comments proved cautious in tone, flagging continued supply challenges, high commodity prices and the conflict in Ukraine.

Volkswagen shares fell by around 2% in European trading, having retreated by more than 15% year-to-date. Shares for Tesla (NASDAQ:TSLA) are down by over a quarter during 2022 and Ford Motor (NYSE:F) by a similar amount.

Volkswagen does have a production plant and sales outlets in Russia. However, management noted that its overall business activities in Russia and Ukraine are not significant. 

Total vehicles delivered to customers in 2021 fell 4% to a 10-year low of 8.88 million. Production numbers declined by almost 7% to 8.28 million vehicles, although overall revenue climbed 12% to €250 billion.

Along with VW itself, other brands include Audi, SEAT, ŠKODA and Porsche. It operates across 120 plants globally. During 2021, VW launched its first all-electric SUV, the ID.4. 

Plans for an initial public offering of its Porsche business in the fourth quarter of 2022 continue to be pursued. 

During 2022, VW expects to increase deliveries by between 5% and 10% and boost revenues by up to 13%. 

ii view:

Volkswagen operates across the two divisions of automotive and financial services. Europe remains its biggest market, generating around 58% of sales, followed by Asia-Pacific at around 20% and North America at just under 20%. The VW brand itself is its biggest seller at around 30% of group sales, followed by Audi at 21%. Porsche accounted for 12% of overall sales in this latest full year. 

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As well as the conflict in Ukraine, investors should be aware of a series of challenges at VW, including rising commodity prices feeding into raw material costs, supply chain difficulties and Chinese plants closed because of the pandemic. Other considerations include the position built by Tesla in the all-electric vehicle sector. 

More favourably, the diversity of its brands helps even out the ups and downs of each. A move into the all-electric market has been made, while the potential IPO of its Porsche business could help shine a light on the valuation of the wider company. In all, and given the strength of its brands, this global automaker will likely find a  place within many already diverse and long-term focused share portfolios. 

Positives: 

Strong brand names including Audi and Porsche

Diversity of grill badges helps even out the ups and downs of each

Negatives:

Geopolitical tensions and uncertain economic outlook

Reputational hit from previous emissions scandal

The average rating of stock market analysts:

Buy