Volkswagen’s first quarter pre-tax earnings rise to €3.3bn

Volkswagen's first-quarter operating profit jumped 17 per cent, beating analysts' predictions on growth at the Audi and Porsche luxury-car divisions and benefitting from the weaker euro.

Earnings before interest and taxes increased to €3.3 billion ($3.6 billion) from €2.9 billion a year earlier, the company said in a statement on Wednesday.

The figure was more than the €3.14 billion average of 10 analyst estimates compiled by Bloomberg.

Operating profit improved to 6.3 per cent of revenue from 6 per cent. The manufacturer stuck to a full-year target range of 5.5 per cent to 6.5 per cent.

Volkswagen, shaken this month by a power struggle that led to chairman Ferdinand Piech's sudden resignation, has been struggling to improve US sales and the VW brand's profitability in an effort to overtake Toyota as the world's biggest carmaking group by 2018.

"We have always emphasized that 2015 will be a challenging year for the automotive industry as a whole, and also for us," chief executive Martin Winterkorn said in the statement.

“The key focus for the entire workforce is on ensuring that 2015 will be another successful year.”

Backed by a €5 billion efficiency program that Winterkorn kick-started last year, VW aims to lift the operating profit margin of its namesake marque to more than 6 per cent of sales.

The unit's first-quarter margin widened to 2 per cent from 1.8 per cent, as cost cuts helped offset the impact of market declines in Russia and Latin America.

Weak Margin

"The development of the VW brand will be in focus in coming months," said Daniel Schwarz, a Frankfurt-based analyst at Commerzbank.

“The margin is still pretty weak,” but the overall numbers for the group “look robust.”

Volkswagen shares rose as much as 2.2 per cent to €245.50 euros and were up 0.5 per cent this morning.

The stock has climbed 31 per cent this year, valuing the company at €114 billion.

First-quarter revenue rose 10 per cent to €52.7 billion, helped by foreign-exchange effects stemming from the euro’s decline.

Volkswagen remained in second place in worldwide deliveries versus Toyota during the quarter, with sales rising 1.8 per cent to 2.49 million cars and trucks, compared with a 2.5 per cent decline to 2.52 million vehicles at the Japanese competitor.

The German company’s Audi unit posted a 6.1 per cent increase in first-quarter deliveries, helping the brand boost operating profit 7.7 per cent to €1.4 billion.

Demand for the Porsche Macan compact crossover helped that brand’s deliveries surge 32 per cent. The sports-car unit’s profit rose 9.6 per cent to €765 million.

- Bloomberg