The Volkswagen Group also made significantly higher profits in 2021, despite the tough supply crisis with microchips. Like BMW, Mercedes-Benz or Opel’s mother Stellantis, the Wolfsburg-based company managed to improve its financial figures. For the current year, Europe’s largest car group has so far been quite confident. But the war in Ukraine in particular, with its unpredictable consequences for energy and raw material prices and the security of vital supply chains, is causing unrest.
The situation for VW – despite the stress in electronics purchasing – is relatively comfortable. The bottom line is that the network of companies with brands such as VW cars, Audi, Porsche, Skoda and Seat earned 15.4 billion euros last year. As the group reported on Friday evening based on preliminary figures, that was almost three quarters more net income than in 2020. After the corona-related sales problems of the previous year, sales grew by 12.3 percent to 250.2 billion euros.
Many customers currently have to wait a long time for their car. CFO Arno Antlitz indicated that prices could also rise as a result of rising energy and raw material costs. Much now depends on the development and duration of the conflict in Eastern Europe. Should this last longer, additional savings could possibly arise within the company. VW is sticking to the investments.
The group performed worse in deliveries. The number of vehicles handed over worldwide fell by 4.5 percent to almost 8.9 million. A decline was also reported after the first two months of this year, down by around a sixth. The core brand just imposed an order freeze for plug-in hybrids due to a lack of parts. Particularly painful for VW: The most important market, China, was down around 17 percent in January and February.
The Toyota Group delivered 10.5 million cars worldwide and took the lead in this regard. The VW group sales were recently 2.4 million below the value of the pre-corona year 2019. However, the demand for electric and hybrid cars developed well. Deliveries of pure electric vehicles almost doubled.
Bottlenecks in electronic components weighed heavily on the industry. Antlitz was comparatively optimistic: “We see that the supply of semiconductors will improve, especially in the second half of the year.” The lack of chips remains a structural problem.
At VW, some locations are already dry because there are no cable harnesses manufactured in western Ukraine. After the plants in Saxony, there should be another shift failure and short-time work in Wolfsburg, among other places. “We’re still getting some supplies at the moment, but of course it’s difficult,” said Antlitz about the situation in Ukraine. “Further restrictions will gradually come over the next few days.”
The ambitions for the new year are big – so far at least. In the best-case scenario, VW top management expects more income and sales. “But all of this is subject to further development,” says Antlitz. “It is still unclear how the Ukraine conflict will affect the entire supply chain and the global economy.”
It cannot be ruled out that some of the rising energy prices will eventually be passed on to consumers. Appropriate hedging transactions would bring stability. “But of course that will affect our business in the medium term – and of course one or the other will have to be passed on.” Last year, the top-class brands with higher returns “performed better than the volume brands”. The prices achieved would also have increased because many customers bought better equipped vehicles.
The management ruled out new austerity programs after a dispute between works council chief Daniela Cavallo and CEO Herbert Diess at the end of 2021. If costs need to be reduced further, then only within the framework of existing agreements. A 5 percent reduction was planned by 2023. Speaking about Ukraine, Antlitz said major investment projects are here to stay. But: “If the crisis persists, there may be a situation where you have to make significant adjustments to the normal fixed costs.”
Like many other companies, VW initially wants to suspend production in Russia. The same applies to car exports. Regarding possible burdens from threatened expropriations, Antlitz said: “The discussion is too early, I can’t evaluate that yet.” In general, the group explained: “To what extent our business in Russia will be affected in the long term cannot be foreseen at the moment. However, we will continue to follow current developments very closely.”
The group has been represented in the Russian Federation with the brands VW passenger cars, VW commercial vehicles, Skoda, Audi, Lamborghini, Bentley and Ducati. In 2021, almost 200,000 cars were sold in the market, and the group manufactured around 170,000 vehicles there. Antlitz did not want to comment on the question of possible gas import bans in Western Europe. However, he made it clear about coal and natural gas: “We are in a situation where we can use both energy sources.” VW is converting its power plant at its Wolfsburg headquarters from coal to gas.
Diess warned that the war could have even more severe effects than the Corona crisis. A protracted dispute would probably hit Europe “much worse” than the spread of the COVID-19 pathogen, the manager recently told the “Financial Times”.
Meanwhile, the profits at VW are bubbling up again – and the shareholders should benefit. A dividend of EUR 7.50 per common share and EUR 7.56 per preferred share will be proposed to the Annual General Meeting on May 12, more than half the amount in the previous year.
Part of Porsche AG is to be listed on the stock exchange, and the group is aiming for a period up to the fourth quarter of this year. “We have not stopped the preparations. On the contrary: they continue as planned, we are confident that we will still reach this window,” said Antlitz on Friday.
Volkswagen’s competitors were also able to increase their profits in the past year. BMW achieved a record profit of 12.5 billion euros, a good three times as much as in the previous year. At Mercedes-Benz it was 23 billion euros, with a large amount coming as a book profit from the spin-off of the Daimler truck division. The Stellantis group formed from Fiat Chrysler and PSA with the Opel brand earned around 13 billion euros in 2021.
The share, which is listed on the DAX, rose by 2.2 percent after the trading day on the Tradegate trading platform on Friday compared to the Xetra close.
IPO/VW CFO: Preparations for the Porsche IPO are proceeding according to plan
Despite the upheavals on the financial markets, the Volkswagen Group intends to press ahead with the planned IPO of the sports car subsidiary Porsche. “We have not stopped the preparations. On the contrary, they are continuing as planned,” said VW CFO Arno Antlitz in a conference call with journalists on Friday. If possible, VW wants to go through with the mega IPO this year and had targeted the fourth quarter for this. “We are confident that we can still reach this window,” said Antlitz.
Russia’s war against Ukraine has caused severe turmoil in the stock, bond, commodity and currency markets. The leading German index, the DAX, fell from around 15,500 points in mid-February to below 12,500 points last Monday as a result of the invasion of the Russian army in Ukraine. Large fluctuations on the stock exchanges are usually poison for planned IPOs.
Meanwhile, the VW owner holding Porsche SE (PSE) can look forward to a windfall from Wolfsburg. With the proposed dividend of EUR 7.50 per VW ordinary share, PSE would pocket around EUR 1.18 billion. However, a spokesman for the Stuttgart holding company of the Porsche and Piëch families objected that more than 300 million euros would first be paid to the tax office due to changed tax guidelines for holding companies.
In an IPO, Porsche SE wants to acquire a good 25 percent of the ordinary shares in Porsche AG so that the families can once again have direct access to the car manufacturer with the family name. Porsche SE, which is now also listed on the Dax, intends to make a proposal for its own dividend to shareholders in the coming weeks.
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