Economy

Volkswagen lifts margin outlook again after record profit

Date: Jul 29, 2021

Europe's largest carmaker, Volkswagen, on Thursday raised its profit margin target for the second time in less than three months, pointing to record earnings in the first half of 2021 that even blew past pre-pandemic levels.

The company said it now expected an operating return on sales of 6.0-7.5%, having previously guided for 5.5-7% and nudged up its forecast for net cash flow at its automotive division, now expected to be much stronger in 2021.

First-half operating profit before special items reached €11.4 billion ($13.5 billion), above the previous record of €10 billion ($11.8 billion) achieved in 2019, before the coronavirus pandemic wreaked havoc in the global economy.

The strong increase was in part driven by high demand for high-margin luxury Porsches and Audis.

"We're keeping up our high pace, both operationally and strategically," Chief Executive, Herbert Diess, said in a statement, published only hours after the carmaker, along with partners, launched a bid for French-listed Europcar.

"Our electric offensive is picking up momentum and we will keep on increasing its pace in the months to come," said Diess, who aims for Volkswagen to overtake Tesla as the world's largest electric vehicle player by 2025.

Porsche SE, Volkswagen's largest shareholder, also raised its outlook following the carmaker's result, now forecasting profit after tax of €3.4 billion ($4 billion) to €4.9 billion ($5.8 billion) in 2021.

Shares in Volkswagen were indicated to open 0.7% higher in pre-market trade.

The global car sector has been hit by a shortage of crucial semiconductors, with numerous rivals, including Daimler, BMW and GM, adjusting or halting production, and Volkswagen accounted for that in its deliveries forecast.

"The risk of bottlenecks and disruption in the supply of semiconductor components has intensified throughout the industry," the company said, lowering the outlook for deliveries to customers.

It now expects deliveries to be up noticeably in 2021 from the 9.3 million last year, having previously expected them to rise "significantly."

--Reuters--

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