Volkswagen cautions of challenges to meet targets

Volkswagen cautioned on Friday of a tough year prior its preliminary yearly results were weighed down by currency effects and production bottlenecks caused by new emissions testing rules.

The German automaker suffered from a boost in inventories at its Audi and VW brands after a new emissions testing procedure, known as WLTP, took effect in September and postponed road certification for many of its vehicles.

“The headwinds in key markets are expected to strengthen even more in 2019,” Chief Executive Herbert Diess stated in a statement accompanying the earnings.

“Overall, however, we will have to redouble our attempts to meet our ambitious targets in the new financial year.”

Volkswagen, which is still combating to recover from a 2015 scandal concerning emissions test cheating, repeated it wanted to achieve an operating return on sales of between 6.5 and 7.5 percent for the passenger cars department and the group this year, a step welcomed by experts.

“The results are pretty solid, and it’s positive that they stick to their margin forecast especially when contrasted with competitors like Daimler which was more cautious,” Nord LB analyst Frank Schwope, who has a buy rating on the stock, stated.

Vehicle deliveries are expected to increase a little in 2019, and group earnings are seen up to 5 percent higher, Volkswagen stated.

Volkswagen’s 2018 operating profit came in at 13.92 billion euros ($15.8 billion), just 0.7 percent higher than 2018 and below 14.53 billion euros forecast in a poll.

VW stated it expected positive net cashflow for this year, thanks to lower penalties and compensation payments associated to the company’s diesel-cheating scandal even as it faces 80 billion euros in investments to mass produce electric cars.