Volkswagen Group Profit Slides on Lower Sales Volume, Higher Costs — Update

By David Sachs

Volkswagen Group had a sluggish start to the year, posting a steep drop in earnings and lower revenue, but said it expects new orders to lift second-quarter results.

The German carmaker said Tuesday that first-quarter revenue fell on fewer sales, while higher costs and a weaker performance by high-end brands Porsche and Audi ate into group earnings, which finished below analysts' expectations.

Free cash flow--a closely watched metric for shareholders--also came in negative and below expectations.

Despite the slow start, which both the company and analysts expected, Volkswagen said new orders are encouraging and should boost its numbers, starting in the second quarter. The company also pointed to new model launches and upgrades throughout the year, which have weighed on costs but should help sales.

"At the same time the effects our efficiency programs will gradually unfold as the year progresses," CFO Arno Antlitz said. "In this context, it will be particularly important to vigorously counteract the increase in fixed costs and exercise investment discipline."

Still, Volkswagen flagged upcoming challenges including stiff competition, the global economy, and volatility in the realms of commodity, energy, and currency exchange.

The group's operating result slid 20% to 4.59 billion euros ($4.92 billion), below expectations of EUR4.82 billion, according to a poll of analysts from FactSet. The operating return on sales margin was 6.1%, compared with a margin of 7.5% in the first quarter of last year.

Revenue was EUR75.46 billion compared with EUR76.2 billion a year earlier, as vehicle sales slipped 2%. Analysts had expected revenue at EUR75.66 billion, according to a Visible Alpha consensus.

Aftertax earnings fell about 22% to EUR3.71 billion.

Volkswagen Group reported a net cash outflow EUR3.03 billion compared with a positive balance of EUR2.24 billion a year prior. Analysts had pegged the outflow at EUR2.05 billion, according to FactSet.

The company backed its full-year outlook.

Write to David Sachs at david.sachs@wsj.com

(END) Dow Jones Newswires

April 30, 2024 03:17 ET (07:17 GMT)

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