VW releases early results which beat estimates

Volkswagen released first-half data report unexpectedly after the market closed on Tuesday evening, a day ahead of the scheduled announcement. The German car-maker’s first-half operating profit declined 12% to 5.78 billion euros which it attributed to costs related to a car recall in China and charges booked by MAN, its truck and engineering business.

The group is facing taught economic conditions in the important German car market and its growth in the US has slowed due to pause in the release of new models.

“While we shall see positive effects from our attractive model range and strong market position, there will also be increasingly stiff competition in a challenging market environment,” VW said. “Disciplined cost and investment management and the continuous optimisation of our processes remain integral parts of our strategy”.

As Volkswagen made 2.34 billion euros in operating profit in the first quarter, this suggests that it piled about 3.4 billion euros in second-quarter operating profit, putting it well ahead of analysts expectations for about 3.1 billion.

“It’s a clear ebit [earnings before interest and tax] beat,” Daniel Schwarz at Commerzbank said. “VW’s cash flow should also be perceived positively by the market.”

The group is also being hurt by the unconvincing performance of MAN, which fell to a 10 million euros first half operating loss due to project-related provisions in its power plant business. MAN forecast a “very pronounced” decline in operating profit for 2013.

However, VW keeps on performing much better than its European mass-market rivals thanks to a broad stable of brands and its large international presence. The German-based car manufacturer said sales growth in China remained strong.

First-half revenues added 3.5% to 98.7 billion compared with the year-ago period as total vehicle deliveries climbed 5% to 4.8m. The company had 11.3 billion euros in net cash at the end of June, representing a 7% improvement since the beginning of the year.

VW maintained its forecast for group revenues to exceed last year’s total of 192.7 billion euros and for operating profit to match last year’s level.

Volkswagen shares are trading up 0.57% today trying to offset year to date decline of 1.59%.