Volkswagen Shares Restructuring Success in South America

The Volkswagen Group already presented the figures for the past year on Friday evening. The presentation of the carmaker’s balance sheet followed on Tuesday. The topics and what the share is doing.

Volkswagen significantly increased its profits in the past year. In addition to billions in savings and higher vehicle prices, this was also due to successful renovations in some regions. One of them was South America, where the car manufacturer had not gotten anywhere for years due to a failed model policy and had burned a lot of money. The turnaround in earnings was successful there, as the Dax group announced on Tuesday.

In North America – i.e. the USA, Canada and Mexico – the main Volkswagen brand has returned to profitability after a few years. In its largest market in China, the group is still profitable and in a strong position with a market share of 16 percent. However, the operating result of the joint venture companies in China fell by 17 percent to 3.0 billion euros. “The group could have sold significantly more vehicles in 2021, but was unable to meet the high demand due to the shortage of semiconductors,” explained VW.

In Europe, the electric car offensive is now paying off. The group is making progress with the goal of more profitable growth through uniform vehicle architectures and platforms for software and mobility solutions. “We are fully on course to develop future profit pools and are determined to shape the future of mobility,” said VW boss Herbert Diess. The entire group had already given key figures last Friday.

Volkswagen benefited from high vehicle prices

Volkswagen‘s core brand was able to achieve a greatly improved result in 2021 despite considerable problems due to the chip crisis. Although car sales slipped due to the lack of chips, the Wolfsburg-based company was able to increase its profit from ongoing business more than fivefold to around 2.5 billion euros. In 2021, Volkswagen benefited from strong demand combined with a shortage of supply and was therefore able to push through higher prices. At the same time, fixed costs fell significantly. After the end of the year 2020, which was shaped by corona, only 454 million euros in operating profit were on the balance sheet of the core brand. Sales of VW passenger cars increased from around 71.1 billion to 76.1 billion euros, according to the annual report. However, sales fell from 2.8 million cars to 2.7 million. The VW commercial vehicles from Hanover were able to turn their loss of 454 million euros (2020) back into a manageable operating profit of 73 million euros.

After the slump in the corona year 2020, the VW subsidiary Audi is again on the clear path to recovery. Last year, the Ingolstadt-based premium carmaker achieved an operating profit of 5.55 billion euros, more than twice as much as a year earlier. Sales at Audi climbed by around six percent to 53.1 billion euros. The operating return was around 10.5 percent. Audi delivered 1.68 million cars worldwide last year, 0.7 percent fewer than in 2020.

The sports car maker Porsche has meanwhile expanded its position as the most profitable brand in the Volkswagen Group. Last year, the operating result before special items increased by almost a quarter to five billion euros. The operating return increased by around one percentage point to 16.5 percent. Positive volume and mix effects – ie the increase in sales and the sale of particularly profitable models – have more than compensated for higher costs. After the premium brand Audi, Porsche is the second-biggest profit maker for the Wolfsburg-based group.

Despite the current market turbulence, VW is sticking to its plans to list the sports car subsidiary Porsche. CFO Arno Antlitz said on Tuesday that work is continuing on a possible IPO in the fourth quarter of 2022. With proceeds of an estimated 20 billion euros, it would be the largest IPO in history in Germany.

There were still effects of the corona pandemic, said Europe’s largest car group. In particular, the “restricted vehicle availability due to the lack of semiconductors” was recently a burden – as with many other car manufacturers. With a view to the Ukraine war, CEO Diess said the company had improved its resilience in recent years and would also overcome this crisis. However, he fears that the global economic consequences of a prolonged military conflict could be even more severe than with the Covid 19 pandemic.

The significantly improved business result of Volkswagen in the past year also played into the hands of group boss Herbert Diess. If you include the current status of expenses for future pensions, the top manager’s remuneration for 2021 totaled more than 10.3 million euros. Without the pension entitlements, Diess still accounted for almost 8.6 million euros, as can be seen in the annual report. The salary components of the VW board members also include a bonus based on the three previous years, as well as the fixed base salary plus fringe benefits.

Assessment of the Volkswagen share

The preferred share listed in the Dax fell by 1.8 percent to EUR 147.46 in a weak market environment on Tuesday. In the past few weeks, the paper had come under significant pressure with the crash on the stock exchanges. After the carmaker published its figures on Friday, it went up by 7.5 percent at times. VW was able to convince with the operating margin, which is very popular with investors. Against the background of delivery problems and the Ukraine war, the prospects for the new year were also assessed as mostly positive.

Despite problems, Volkswagen performed well and far exceeded expectations, wrote JPMorgan analyst Jose Asumendi at the start of the week. The expert praised the outlook of the Dax group as “very solid”.
Investors kept a low profile when the annual report was published. We remain optimistic about the Volkswagen share and continue to recommend the share as a buy.

*Editor’s note: This article is for reference only and does not constitute an offer, solicitation or invitation, inducement, any representation of any kind or form, or any suggestion or recommendation. Readers should use their independent thinking skills to make their own investment decisions , If any loss is incurred due to relevant suggestions, it has nothing to do with “istanbulpost.com.tr”, the editor and the author.

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Volkswagen Shares Restructuring Success in South America - /10

Summary

The Volkswagen Group already presented the figures for the past year on Friday evening. The presentation of the carmaker's balance sheet followed on Tuesday. The topics and what the share is doing.

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