Volkswagen reported a robust second-quarter operating profit that beat even the most bullish expectations today and reaffirmed that pretax and operating profits after special items would grow this year.
Due to a turnaround at both its flagship VW Brand Group and Commercial Vehicles, operating profit at Europe's largest carmaker rose 75 per cent to €911 million ($1.10 billion), beating the average forecast of €685 million given in a Reuters poll of analysts as well as the range of €536 million to €814 million.
After touching a 52-week high at €45.19, the stock pared gains to trade up 1.3 per cent at €44.34 by 10.50am - when the DJ Stoxx European autos index was up 0.9 per cent.
Shares in Volkswagen have outperformed the DJ Stoxx sector index by nearly 10 per cent this year, helped by speculation that a bribery scandal that has engulfed the company could help lead to a change in its cozy corporate culture.
A complete collapse in earnings from its two key Chinese joint ventures led to a 7.4 per cent decline in pretax profit to €551 million but that result was in line with analysts' expectations.
In its results statement Volkswagen said that it would restructure its business in China but gave no details. However, VW said the overall market outlook remained unfavourable despite an improvement in exchange rates.
Moves in exchange rates adversely affected the first-half operating profit of €1.38 billion by €300 million, the company said.
"In addition, we expect that competitive pressures will tend to increase and that the cost of raw materials - especially steel and plastics - will remain at high levels," it said.
Operating profit at its core Automotive division nearly trebled to €637 million in the second quarter, lifting its operating margin to 2.8 per cent versus just 1.1 per cent a year ago.
Free cash flow at Automotive doubled to €1.23 billion. The division benefited primarily from a steep rise in VW Brand Group operating profit to €222 million versus €104 million in the second quarter of 2004.