VW Beginning to Face Serious Cash-flow Consequences of Emissions-Cheating Scandal

Lucy Hill
May 5, 2017

Volkswagen AG on Wednesday confirmed its outlook for the full year and reported a sharp rise in first-quarter profit despite the ongoing fallout from its emissions-cheating scandal.

First-quarter operating profit at Volkswagen's (VW) largest division by sales surged to €869m from €73m a year earlier, the carmaker said today.

The Volkswagen brand saw its earnings climb €73 million to €869 million, while Bentley slowed its losses to only €30 million and perennial cash machine Audi saw its profit slide from €1.3 billion to €1.2 billion.

The company's sales revenue also rose by 10.3 percent to 56.2 billion euros, with the operating return on sales scoring a 7.8 percent, up from 6.1 percent previous year.

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"Our efforts to improve efficiency and productivity across all areas of the Company are also paying off", said Matthias Müller, VW Group's CEO. Porsche Automobile generated sales revenues of 5 billion, with an operating profit of 932 million euros. It has also started to weed out a convoluted reporting structure, including simplifying sales allocations among divisions. Net cash on the company's balance sheet remained strong at about EUR23.6 billion at the end of March.

The Volkswagen Group has been pushing its "Together - Strategy 2025" project, which was born out of the diesel "defeat device" scandal that came to light in 2015.

"The VW group's results for the first quarter are convincing", commented analyst Frank Schwope of Nord/LB bank.

Volkswagen expects a cash outflow in the double-digit billion euro range in 2017 to process the emissions scandal. The expansion of the global model and technology portfolio in the period under review also led to higher depreciation and amortization charges.

Skoda's profit rose by 32 percent to $452.2 million while the Seat brand's profit increased to $61.1 million from $58.9 million. Improvements in the mix and positive exchange rate effects lifted Porsche Automobile's operating profit to $1.02 billion from $933.1 million, VW said.

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