Sales propelling profits in trucks and vans as group result remains in red
The proposed rationalisation of Volkswagen’s structure may prove some sort of challenge to the group bottom line, with the loss of the non-passenger arms the expected outcome.
How much has been revealed in the group’s annual results
Sales revenue at the Scania brand was up €1.5 billion year-on-year at €12.8 billion (A$20.2 billion), up from €11.3 billion the previous year. Operating profit improved to €1.3 billion, up from €1.1 billion, due to higher vehicle sales and an expansion of the service business. In the reporting period, the operating return on sales amounted to 10.1 per cent up from 9.5 per cent.
Sales revenue at MAN Commercial Vehicles rose by 10.8 per cent year-on-year last year to €11.1 billion. Operating profit improved to €362 million, up from €230 million, due to volume and margin effects. The future program also had a further positive effect. The operating return on sales was 3.3 per cent, up from 2.3 per cent.
Volkswagen Commercial Vehicles generated sales revenue of €11.9 billion, up from €11.1 billion in fiscal year 2017.
Despite higher costs resulting from expansion of the production network, operating profit climbed 87.6 per cent to €853 million due to margin, volume and exchange rate effects as well as product cost optimisation. The operating return on sales improved significantly to 7.2 per cent, up from 4.1 per cent previously.
On the engines side, sales revenue in the Power Engineering business area decreased to €3.3 billion compared with €3.6 billion earlier. Operating profit (previous year’s figure excludes special items) was €193 million, up from €194 million. The operating return on sales rose 5.9 per cent, up from 5.4 per cent.
For the rest of the year, deliveries to group customers are expected to “moderately exceed the prior-year figure” but it will still be subject to lingering impacts of the Diesel-gate affair.
“Challenges in the current fiscal year will arise mainly from the economic situation, increasing competition, exchange rate volatility and the diesel issue.
“In the EU, there is also a new, more time-consuming test procedure for determining pollutant and CO2 emissions as well as fuel consumption in passenger cars and light commercial vehicles”, as measured by the Worldwide Harmonised Light Vehicles Test Procedure (WLTP).
It adds that sales revenue for the Volkswagen Group is expected to be up by as much as 5 per cent on the prior-year figure. In terms of operating profit, an operating return on sales of between 6.5 and 7.5 per cent is anticipated.
That is against a loss of €3.2 billion last year and €6.4 billion the year before.
In the light of emissions problems and as a continuation of its efforts to find push past them, with group CEO Matthias Müller emphasising electric propulsion developments at the Group’s Annual Media Conference in Berlin.
Chief of these is the aim to have 16 locations around the globe producing battery powered vehicles by the end of 2022, up from three now and nine in 2020.
Locations are yet to be revealed but the group says partnerships with battery manufacturers for Europe and China have already been agreed. The contracts already awarded have a total volume of around €20 billion. A supplier decision for North America will be taken shortly.
The CEO made a point of emphasising that this did not mean VW was turning its back on conventional drive systems.
Modern diesel drives were part of the solution, not part of the problem, he stressed, and this was also true for climate change.
“We are making massive investments in the mobility of tomorrow, but without neglecting current technologies and vehicles that will continue to play an important role for decades to come,” Müller says.