Volkswagen scraps forecast after coronavirus forces production shutdowns

Volkswagen initially targeted global vehicle deliveries on the prior-year level, revenue growth of as much as 4% and an operating profit margin betwee
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File photo (Bloomberg)
File photo

Volkswagen AG abandoned its full-year outlook after the coronavirus pandemic brought vehicle production and sales to a halt at factories in key markets including China and Germany.

“It is currently not possible to determine when a new outlook can be made for the full year," the world’s biggest carmaker said Thursday in a statement. “The impacts resulting from the pandemic on customer demand, the supply chain and production cannot currently be accurately forecasted."

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The group initially targeted global vehicle deliveries on the prior-year level, revenue growth of as much as 4% and an operating profit margin between 6.5% and 7.5% excluding special items.

Also Read : Volkswagen India pledges to contribute in PM CARES fund to fight coronavirus

Key Insights

  • First-quarter operating profit is forecast to slump to 900 million euros ($979 million). Turbulent financial markets and raw materials prices caused a 1.3 billion euro hit triggered by commodity derivatives and currency effects.
  • Automotive net cash flow swung to a negative 2.5 million euros, as VW was forced to shut production -- first at plants in China, its biggest market, and then across Europe, where it employs about 470,000 workers.
  • (Also read: Amid coronavirus shutdown, Volkswagen plans to resume production step by step)
  • Chief Financial Officer Frank Witter warned on March 17 earnings might fall by at least 50% in the first three months. The company is gearing up to restart production in Europe, taking lessons from the earlier experience in China.

Market Reaction

  • VW preferred shares were up 2.3% on Thursday. They have lost 33% since the beginning of the year, valuing the manufacturer at 63.6 billion euros.
  • The Chinese auto market could rise as much as 14% in the second half of this year as pent-up demand and economic stimulus lure buyers back to showrooms, according to Bloomberg Intelligence estimates. This could trim the market’s full-year decline to about 6%.

First Published Date: 16 Apr 2020, 17:32 PM IST
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