Volkswagen’s operating profit jumps sharply to £4.16 billion in Q1

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on May 6, 2021
  • Volkswagen says its earnings and revenue increased in the first quarter.
  • The carmaker forecasts up to 7.0% of operating return on sales this year.
  • Volkswagen Group shares tanked 10% on market open on Thursday.

Volkswagen AG (ETR: VOW) said on Thursday that its revenue and earnings posted an increase in the first quarter. The company also raised its guidance for full-year operating margin. The news comes more than a month after Volkswagen said it will slash its workforce by up to four thousand jobs.

Volkswagen shares were reported about 2% up in premarket trading on Thursday but tanked 10% on market open. Including the price action, the stock is now exchanging hands at £184.76 per share. In comparison, it had started the year 2021 at a lower £128.31 per share. Learn more about the different types of stock investments.

Volkswagen reports £53.82 billion of revenue

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Volkswagen reported £2.95 billion of post-tax profit in Q1 versus the year-ago figure of a significantly lower £446.77 million. Operating profit, the car manufacturer added, printed at £4.16 billion compared to £781.19 million in the same period last year. Operating return on sales stood at 7.7% in the recent quarter.

According to Volkswagen, the increase in its quarterly earnings was attributed to multiple factors, including a fixed-cost reduction programme, a better product mix, and higher unit sales. The German multinational valued its revenue in the first quarter at £53.82 billion – an increase from £47.57 billion last year. According to FactSet, experts had forecast a slightly lower £53.82 billion of revenue instead.

In separate news from the global automotive industry, Aston Martin reported a smaller first-quarter loss on Thursday.

Volkswagen’s guidance for the full year

For the full financial year, Volkswagen now forecasts its operating return on sales to fall in the range of 5.5% to 7.0%. In its earlier guidance, it had estimated up to 6.5% of operating return on sales this year. The Wolfsburg-based company also expected a sharp increase in its revenue and deliveries in 2021.

Volkswagen also warned on Thursday that the global chip shortage will result in a stronger hit in the second quarter. The owner of the luxury car brand Audi said:

“Challenges will arise particularly from the economic situation, the increasing intensity of competition, volatile commodity and foreign-exchange markets, securing supply chains, and more stringent emissions-related requirements.”

Volkswagen performed fairly downbeat in the stock market last year with an annual decline of roughly 15%. At the time of writing, the German automotive manufacturer has a market capitalisation of £104.30 billion and a price to earnings ratio of 12.86.

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