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 his free… 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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