By Max Bernhard 
 

Volkswagen AG (VOW.XE) on Wednesday reported a rise in second-quarter net profit and sales, despite booking a 1.6 billion euro ($1.87 billion) charge from its diesel-emissions crisis and facing several challenges over the past months, which it warned would continue through the end of the year.

The world's biggest car manufacturer by sales confirmed its 2018 guidance, excluding special items. Shares traded lower as much as 3% following the news.

Net profit in the quarter came to EUR3.23 billion euros ($3.78 billion), compared with EUR3.04 billion in the year-earlier period, and sales rose 3.4% to EUR61.15 billion, the German car maker said. Analysts had expected net profit of EUR3.21 billion and revenue of EUR62.68 billion, according to a consensus estimate provided by FactSet.

"We cannot rest on our laurels because great challenges lie ahead of us in the coming quarters--especially regarding the transition to the new WLTP test procedure," said Chief Executive Herbert Diess, who took the helm at Volkswagen in April.

Volkswagen has previously said the availability of certain models, a sales and earnings, could be hit by the changeover to the new WLTP, or Worldwide Harmonized Light Vehicle Test Procedure, emissions regulation, which comes into effect on Sept. 1 in Europe.

"We need to prepare a volatile second half of the year, particularly due to the WLTP," said Chief Financial Officer Frank Witter.

WLTP presents a near-term challenge, but Volkswagen should be able to recoup most of the lost sales and profits in 2019, said Barclays analysts Dorothee Cresswell and Kristina Church.

"Growing protectionism also poses major challenges for the globally integrated automotive industry," Mr. Diess said, echoing industrywide concerns.

Auto makers across the globe have been struggling with Chinese tariffs on U.S.-made vehicles, as well as higher raw-material prices because of U.S. tariffs on steel and aluminum imports.

Volkswagen's German peer Daimler AG (DAI.XE), as well as Detroit's Big Three--General Motors Co. (GM), Ford Motor Co. (F) and Fiat Chrysler Automobiles NV (FCA.MI)--have already warned that rising trade tensions and tariffs could impact earnings.

Apart from the new emissions testing standard and escalating trade disputes, Volkswagen also faces the continuing fallout from its diesel emissions scandal. In 2015, the car maker admitted to having equipped millions of diesel cars across the globe to dodge emissions testing.

In a sign that the scandal is far from over, the chief executive of VW's premium car maker Audi AG (NSU.XE), Rupert Stadler, was arrested by German police in June and has since remained in investigative custody. Mr. Stadler has in the past said he had no prior knowledge that illegal software had been installed on Volkswagen or Audi engines.

Mr. Stadler hasn't been charged with any wrongdoing. In Germany, it is common practice for prominent individuals suspected of a crime to be named by prosecutors in public. Being named a suspect doesn't mean the person will ultimately be charged.

His arrest happened just days after German prosecutors imposed a EUR1 billion fine on Volkswagen, also in relation to the emissions-cheating scandal. Prosecutors said the penalty was one of the highest ever levied on a German company.

Volkswagen confirmed its 2018 guidance, excluding special items, forecasting sales to rise as much as 5% and operating return on sales between 6.5% and 7.5%.

The company said it expects deliveries this year to moderately exceed those in 2017.

 

Write to Max Bernhard at max.bernhard@dowjones.com; @mxbernhard

 

(END) Dow Jones Newswires

August 01, 2018 04:26 ET (08:26 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.