Volkswagen said cost-cutting and rising European car sales helped it to beat first-half underlying profit forecasts.
Europe’s biggest carmaker is battling to restore its reputation after admitting in September to fitting illegal software that could deactivate emissions controls on around 11 million diesel vehicles.
Some analysts said the stronger-than-expected results for the six months ended June were a sign a recovery might be taking hold, and Volkswagen (VW) shares jumped more than five per cent after the news yesterday.
“Today’s press release is the start of a move in the right direction,” said Barclays analysts.
However, the German company also said it was taking another one-off hit of €2.2 billion, “mainly related to further legal risks predominantly arising in North America.”
VW has already set aside about $18 billion to cover the cost of its emissions cheating scandal, mainly vehicle refits and a settlement with US authorities, and analysts had expected lawsuits and potential regulatory fines to increase that number.
The start of a move in the right direction
Three US states announced on Tuesday civil lawsuits against VW claiming senior executives covered up evidence that the carmaker had cheated emissions tests.
DZ Bank kept its “sell” rating on VW shares yesterday, citing continued uncertainty surrounding the company, despite first-half results which it said signalled the second quarter performance was the company’s best on record.
In an unscheduled update ahead of interim results on July 28, VW said its first-half operating profit before one-off items rose seven per cent to €7.5 billion.
Evercore ISI analyst Arndt Ellinghorst said that suggested second-quarter operating profit was about €1 billion higher than analysts’ consensus forecast.
Including one-off items, VW said its first-half operating profit dropped 22 per cent to €5.3 billion.
Moreover, it said the improvement in operating performance was driven by its mass-market VW brand, its largest by sales, and helped by rising European car sales, cost cutting and a return of orders from corporate fleets.