Volkswagen ditches outlook as COVID-19 hammers first-quarter profit

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German automaker Volkswagen Group withdrew its outlook for 2020 on Thursday because of the uncertainty related to the coronavirus outbreak which caused operating profit to decline 81% in the first quarter.

The automaker, like others in the sector, stopped production at some sites previous month as governments across the world imposed lockdowns on their populations to control the spread of the coronavirus.

The measures to control the movement of people have impacted auto sales and profit in the first quarter, the automaker said.

Operating profit dropped to 0.9 billion euros ($979.7 million), which would be a 81% decline from 4.84 billion last year, and the group’s return on sales margin is expected to be around 1.6%, declining from 8.1% in the first quarter of the last year.

The entire year outlook “can no longer be achieved”, Volkswagen stated. In February Volkswagen had stated it intended to achieve customer deliveries in line with the previous year, revenue growth of 4% in this year and slightly higher passenger car deliveries.

In its passenger cars unit, the automaker had predicted an operating return on sales between 6.5%-7.5% in 2020 and an operating return on sales of 4%-5% in its commercial automobiles unit.

Porsche Automobil Holding SE, the family-controlled holding company which owns a most of the stake in Volkswagen Group, also withdrew its forecast for 2020 because of the earnings situation at the automaker.

VW stated negative fair value impacts from commodity derivatives and currency effects impacted the first quarter 2020 result by 1.3 billion euros.

The company now expects first quarter earning of 55 billion euros, dropping 8% from 60.01 billion euros in the year-earlier period.

Its automotive business had a negative cash flow of 2.5 billion euros, because of higher inventories and a decrease in its liabilities, VW stated.

VW’s luxury arm Audi stated measures to control the coronavirus pandemic had led retail sales to come to a near standstill. Sales revenue in the first quarter was 12.5 billion euros, dropping from 13.8 billion euros in the year-earlier duration.

Volkswagen Group, which owns Audi, Bentley, Bugatti, Skoda and Porsche, is set to release full first quarter results on April 29, 2020.

Coronavirus has so far infected more than 2,256,844 people and killed more than 154,350 people worldwide.

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