Volkswagen Group Reports Solid H1 2014 Business Growth Despite Difficult Market Environment

The Volkswagen Group’s first-half numbers have started to emerge, and as we’ve previously reported, they look quite good.  Sales revenue was only slightly up over the previous year, but operating profit jumped 7% which was no doubt helped by Volkswagen’s implementation of the MQB architecture.  Stand-out performers for the Volkswagen Group include Volkswagen Commercial Vehicles who’s operating profit rose by 13.5%, and Porsche, who achieved an operating profit of 17.1%.

Read the full Press Release below.

  • First-half sales revenue only slightly up on the prior-year period at EUR 98.8 billion due to currency-related factors
  • Operating profit rises by 0.4 billion to EUR 6.2 billion
  • Profit before tax grows by 17.5 percent to EUR 7.8 billion
  • Net liquidity in Automotive Division remains high at EUR 14.0 billion

The Volkswagen Group reported solid business growth in the first six months of 2014 despite the ongoing difficult market environment. At EUR 98.8 billion (EUR 98.7 billion), sales revenue in the first six months was only slightly up on the prior-year period due to significant negative exchange rate effects. Operating profit grew by 7.0 percent to EUR 6.2 billion (EUR 5.8 billion) and the operating return on sales rose to 6.3 percent (5.9 percent). The Group’s operating profit and sales revenue exclude the activities of the Chinese joint ventures, which are accounted for in the financial result using the equity method and are therefore not included in consolidated operating profit. The share of operating profit attributable to the Chinese joint ventures in the first half of 2014 was EUR 2.6 billion (EUR 2.4 billion).

The Volkswagen Group’s profit before tax amounted to EUR 7.8 billion (EUR 6.6 billion). The return on sales before tax rose to 7.9 percent (6.7 percent) in the first six months, due among other factors to measurement effects in the financial result. Profit after tax was EUR 5.7 billion (EUR 4.8 billion). “Despite headwinds, our financial performance in the first six months was good. In light of the continued strong competitive pressures, the tense situation in some emerging economies and the fundamental technical and economic changes happening in our industry, we are working hard to create all the conditions we need today to ensure success tomorrow. I am confident that we will not flinch from the path we have chosen”, said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft, in Wolfsburg on Thursday.

Global demand for passenger cars continued to rise in the first six months of 2014. However, the pace of growth eased off and trends were mixed at a regional level. The number of new registrations in the Asia-Pacific region, Western Europe, North America and Central Europe increased year-on-year, while the markets in South America and Eastern Europe recorded market volumes that were significantly lower year-on-year in some cases. “The macroeconomic situation has rarely been so volatile and fragmented – from exchange rates down to the declines in the emerging economies. That’s why it’s more important than ever before for us to stick to our disciplined cost and investment management and to maintain our solid financial position so that we can achieve our profitability targets and strategic goals for 2018”, said Chief Financial Officer Hans Dieter Pötsch.

Net liquidity in the Automotive Division remains high

Net liquidity in the Automotive Division amounted to EUR 14.0 billion at the end of June (December 31, 2013: EUR 16.9 billion). The acquisition of the Scania shares and the capital increase at the Financial Services Division reduced liquidity, while the capital increase from issuing new preferred shares and the successful placement of hybrid notes strengthened the Automotive Division’s capital base. Investments in property, plant and equipment (capex) in the Automotive Division declined slightly to EUR 3.6 billion (EUR 3.9 billion). The Volkswagen Group maintained its disciplined approach to investment with a ratio of capex to sales revenue in the Automotive Division of 4.1 percent (4.5 percent). Investments were made primarily in production facilities and in the models to be launched in 2014 and 2015, as well as in the ecological focus of the model range.

Brands and business fields

The Volkswagen Passenger Cars brand recorded an operating profit of EUR 1.0 billion (EUR 1.5 billion) in the first six months of 2014. Operating profit was negatively impacted by lower volumes, negative exchange rate trends and higher upfront investments in new technologies. It should be noted that this figure does not include the Chinese joint ventures. The operating margin reached 2.1 percent (3.0 percent) in the first six months. The Volkswagen brand has launched an efficiency program in order to reach its target operating return on sales of at least six percent by no later than 2018.

Audi’s operating profit was roughly on a level with the previous year, at EUR 2.7 billion (EUR 2.6 billion). Earnings growth was impacted by negative exchange rate effects, high upfront investments in new products and technologies, as well as in the expansion of the international production network. The operating margin was 10.0 percent (10.5 percent).

ŠKODA generated an operating profit of EUR 425 million (EUR 243 million) in the first half of 2014, a considerable increase compared with the previous year on the back of volume and mix-related factors. The operating margin in the first six months was 7.1 percent (4.9 percent).

Positive volume, mix and product cost effects helped SEAT improve its operating result to EUR – 37 million (EUR – 40 million).

Bentley’s operating profit climbed year-on-year to EUR 95 million (EUR 58 million), and its operating margin was 10.7 percent (8.3 percent).

Porsche recorded an operating profit of EUR 1.4 billion (EUR 1.3 billion) and an operating margin of 17.1 percent (18.4 percent) in the first six months.

Operating profit at Volkswagen Commercial Vehicles rose by 13.5 percent year-on-year to EUR 280 million (EUR 246 million). The operating margin was 5.9 percent (5.2 percent).

Scania posted an operating profit of EUR 476 million (EUR 464 million) and an operating margin of 9.4 percent (9.1 percent). MAN generated an operating profit of EUR 222 million (previous year: operating loss of EUR 124 million) and an operating return on sales of 3.3 percent.

Volkswagen Financial Services generated an operating profit of EUR 776 million
(EUR 696 million) in the first six months of 2014, a year-on-year increase of 11.5 percent. Worldwide 2.3 million new financing, leasing and service/insurance contracts were signed (+ 16.1 percent).

Winterkorn: “We want to be a leader in shaping the future of the automobile.”

The Volkswagen Group will press ahead with its product initiative across all brands in 2014, modernizing and expanding its offering by introducing attractive new vehicles. Volkswagen is expecting a moderate increase in deliveries to customers in fiscal year 2014. Challenges for the Group will come from the difficult market environment and fierce competition, as well as interest rate and exchange rate volatility and fluctuations in raw materials prices. Volkswagen believes that the modular toolkit system, which is being continuously expanded, will have an increasingly positive effect on the Group’s cost structure.

The outlook for the current year was reiterated. Depending on economic conditions, Volkswagen is expecting 2014 sales revenue for the Group and its business areas to move within a range of 3 percent around the prior-year figure. In terms of the Group’s operating profit, Volkswagen is forecasting an operating return on sales of between 5.5 percent and 6.5 percent in 2014 in light of the challenging economic environment, and the same range for the Passenger Cars Business Area.

The Group expects the Commercial Vehicles/Power Engineering Business Area to moderately exceed the 2013 figure. Volkswagen anticipates an operating return on sales of between 8.0 percent and 9.0 percent in the Financial Services Division.

“Our Group has recorded strong growth in recent years. This offers us many opportunities across all of our brands to become more efficient and to leverage synergies – our urgent priority is now to exploit this potential”, said Winterkorn, adding: “Our ambition is to be a leader in shaping the future of the automobile. We are now creating the conditions for doing that with our ‘Future Tracks’, our Group wide future and efficiency orientated program.”











Volume Data

Deliveries to customers

(‘000 units)



+ 5.6



+ 5.6

Vehicle sales (‘000 units)



+ 5.9



+ 6.8

Production (‘000 units)



+ 6.8



+ 7.1


(‘000 at June 30/Dec. 31)



+ 0.5

Financial Data

(IFRSs), EUR million

Sales revenue



– 2.2



+ 0.1

Operating profit



– 3.1



+ 7.0

as a percentage of sales revenue





Profit before tax



+ 12.4



+ 17.5

as a percentage of sales revenue





Profit after tax



+ 14.1



+ 19.3

Automotive Division

Cash flows

from operating activities



+ 25.2



– 0.5

Cash flows from investing activities

attributable to operating activities*



– 2.8



– 24.0

of which: investments in property,
               plant and equipment



– 13.3



– 8.8

               as a percentage of sales





Net cash flow



+ 80.6




Net liquidity

at June 30



+ 23.6

Net liquidity

at June 30/Dec. 31



– 17.1