VW brand recovery continues

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VOLKSWAGEN REPORTED a 28 percent jump in first-quarter operating profit, helped by a return to earnings growth at its core VW brand which has struggled to recover from the German carmaker’s diesel emissions scandal.

Group operating profit came to 4.4 billion euros in the three months to the end of March, compared with 3.4 billion in the year-earlier period, Volkswagen said on Tuesday last week, as it published key financial figures ahead of schedule.

Although the group has bounced back from the scandal and overtook Japan’s Toyota last year to become the world’s biggest selling carmaker, analysts view a turnaround at the VW brand as key to its prospects.

Shares in Volkswagen jumped immediately the announcement was made public, trading 3.7 percent higher at 136.00 euros, making them the third-biggest gainers on the STOXX Europe 600 index.

Volkswagen said on last week that first-quarter operating earnings at the VW brand came to around 900 million euros, up from 73 million in the year-earlier period.

“Causal factors for the Volkswagen Brand result include the success of new model introductions, particularly the Tiguan, and a strong financial performance in the West European market,” Volkswagen said in a statement.

“Optimised fixed costs also positively affected the result,” it added.

DZ Bank analyst Michael Punzet, who has a “hold” recommendation on VW’s stock, said he had expected the brand’s operating profit to come to around 500 million euros.

Volkswagen said its other brands, which include Audi and Skoda, also contributed to the good performance but did not provide any further financial details.

However the group said it still expected to report a full-year group return on sales of between 6 and 7 percent this year.
“If Q2 continues to do well, we expect VW to increase its full-year guidance in summer,” said Evercore ISI analyst Arndt Ellinghorst, who had expected first-quarter group operating profit of around 3.8 billion euros.

Volkswagen is due to publish detailed first-quarter financial results on May 3.

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