Europe’s leading automaker, Volkswagen announced on Friday a downward revision of its profit margin forecast for 2023, citing adverse impacts stemming from raw material hedges at the close of the third quarter. The German automotive giant indicated in a press release that it anticipates an operating profit before special items of 22.5 billion euros ($23.9 billion) for the year, signifying a return on sales ranging between 7.0% and 7.3%. This is a dip from the prior estimate of 7.5% to 8.5%.
According to analysts at Bernstein Research, “This may be better than some investors have feared and could spell an end to negative sentiment on the name for now.” The controlling shareholder of the Wolfsburg-based company, Porsche SE, also adjusted its outlook for 2023, foreseeing group profit after tax to fall within the lower half of a 4.5 billion-to-6.5 billion-euro range.
Following this announcement, shares of Volkswagen, traded on the Frankfurt Stock Exchange, experienced a 2.5% decline. The automaker, however, affirmed its commitment to delivering between 9 million and 9.5 million vehicles to clients this year, with sales projected to grow by 10% to 15%. Additionally, it reported that sales during the July-September period saw a notable 12% surge, amounting to 78.8 billion euros. Meanwhile, operating profit recorded an approximate 14% rise, reaching 4.9 billion euros.
Volkswagen disclosed that comprehensive quarterly figures would be released on October 26. The company attributed its financial setbacks to losses incurred from hedging activities against commodity price fluctuations, totaling 2.5 billion euros ($2.7 billion), which could not be offset by year-end. Furthermore, the automaker grappled with production shortfalls at a supplier, a consequence of flooding in Slovenia.
While the profit margin warning from Volkswagen may not have been entirely unforeseen by some investors, it nonetheless comes as a disappointment for many. The company’s strategic adjustments in light of these challenges reflect the resilience and adaptability needed to navigate the complexities of the global automotive industry.
Source: Reuters
