Volkswagen Reports Lower 1st Quarter Profits, €1 billion On Hold for Legal Risks

Volkswagen’s first quarter profits dropped as the German automaker reported setting aside €1 billion as legal risks cover that arises from the company’s 2015 diesel scandal.

Despite this, the company still posted better earnings from its main car brand as well as from stronger profit margins.

In the Q1 report, Volkswagen’s after-tax profit declined to €3.05 billion ($3.41 billion), compared to the €3.30 billion registered over the same period a year ago.

Accordingly, the firm’s revenue from group sales reportedly rose 3.1 percent to €60 billion even as vehicle sales declined.

The profit margin on sales- which is key to determining profitability- reportedly climbed 8.1 percent, up from 7.2 percent. Ostensibly, the figures surpass estimates that put the margin range at between 6.5 percent and 7.5 percent.

The company’s Chief financial officer (CFO) Frank Wittner termed the results as being “very strong” and that the first quarter report was better than was expected.

Speaking to Associated Press, Wittner attributed that to strong operational performance, noting that declines in volume were offset by a combination of “price and mix effects.”

The Volkswagen brand’s operating profit rose 5 percent to hit €921 million as the company leveraged measures like cost control to balance its lower volumes. The story was different from the Audi and Porsche divisions though, as earnings from these luxury brands fell.

Audi’s profits fell from a previous €1.3 billion to €1.1 billion, with the company attributing this to changes in the car model and other expenses, including money spent on new technologies.

For the other luxury brand Porsche, operating profit dropped by 12 percent to hit a low of €829 million.

Sales revenue jumped in the first quarter, although the company reportedly sold 2.6 billion vehicles, 2.8 percent lower than in the same quarter a year ago. But the company attributed the jump in revenue to robust pricing mechanisms and the availing of more-profitable car models.

In 2018, Volkswagen topped as the world’s leading automaker in terms of volume sales, accounting for over 10.8 billion vehicles.