By Friedrich Geiger
BERLIN-- Volkswagen AG's net profit fell 16% in the second
quarter because of weakness in China and restructuring charges at
its trucks business, and the world's largest car maker by volume on
Wednesday cut its full-year outlook for deliveries.
Net profit dropped to EUR2.67 billion ($2.95 billion), missing
analysts' average forecast of EUR3 billion. Volkswagen now expects
to deliver the same number of cars to customers this year as last
year, after having earlier predicted a moderate increase.
"The difficult market environment and fierce competition, as
well as interest-rate and exchange-rate volatility, and
fluctuations in raw materials prices all pose challenges," said
Chief Financial Officer Hans Dieter Pötsch.
Volkswagen shares declined on the news.
"Improvements in Europe [are] insufficient to ease investor
concerns over broken China," said Evercore ISI analyst Arndt
Ellinghorst.
Chinese joint ventures contributed about EUR1.1 billion to
Volkswagen's operating profit, down from about EUR1.4 billion a
year earlier, according to Wall Street Journal calculations based
on first-half and first-quarter figures.
The company didn't disclose second-quarter figures for
contributions from the joint ventures. Operating profit excluding
those joint ventures rose 4.9% to EUR3.49 billion.
For the full year, Mr. Pötsch said he expects operating profit
in China this year to be slightly lower than last year.
Revenue, which also doesn't include the Chinese joint ventures,
increased 9.9% to EUR56.04 billion in the second quarter, helped by
exchange-rate effects and a higher share of expensive vehicles
among cars sold.
Volkswagen delivered 2.40 million passenger cars to customers in
the second quarter, 2.8% less than a year earlier. A 9.5% decline
in China, to 842,868 deliveries, outstripped gains in Europe and
other regions.
The era of double-digit percentage growth rates in China is
apparently over, said NordLB analyst Frank Schwope, but the country
remains a promising market because car ownership is still much
lower than in the West.
The German company overtook Toyota Motor Corp. as the car maker
that sold the most cars in the world in the first half of the
year.
Volkswagen's profit declined as it faces challenges on several
fronts. The search for a new permanent supervisory board chairman
continues after Ferdinand Piech quit in April. At the same time,
the group is integrating its three truck brands, MAN, Scania and
VW.
MAN booked EUR170 million in restructuring provisions in the
quarter, which also dragged group earnings lower.
Volkswagen confirmed its forecast of a full-year operating
profit margin of between 5.5% and 6.5% for the group, and 6.0% to
7.0% for the passenger cars business. These margin forecasts
exclude Chinese joint ventures.
Mr. Pötsch, the CFO, said Volkswagen may announce restructuring
measures in coming months.
"There is a lot of talk on the restructuring issue," he said
regarding media reports. "I think if any changes need to be
announced it is going to happen during the remainder of the
year."
Write to Friedrich Geiger at friedrich.geiger@wsj.com
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