BERLIN: Volkswagen AG reported a 56% drop in second-quarter profit, hit by costs stemming from its emissions-cheating scandal and weaker results from China.
The Wolfsburg, Germany-based car maker, which outpaced rivals Toyota Motor Corp. and General Motors Co. in sales in the year’s first half, said after-tax profit fell to €1.2 billion ($1.33 billion), from €2.7 billion in last year’s second quarter.
The company’s shares fell about 3% to €124.20 in trading on the Frankfurt Stock Exchange on Thursday, as investors who have driven the shares higher in recent weeks took profits, analysts said.
Volkswagen said its revenue for the second quarter was €56.9 billion, up 1.7% from €56 billion a year earlier.
Operating profit, as reported last week, surged nearly 20% to €4.4 billion. That was halved, however, by charges of €2.5 billion, largely related to the emissions-cheating scandal.
Volkswagen on Thursday provided details not included last week’s advance release of headline profit figures that beat analysts’ forecasts, but they held no real surprises, analysts said.
“This shows that the Volkswagen Group has high earnings power. But it will require continued hard work to absorb the significant impact from the diesel issue,” said Chief Finance Officer Frank Witter.
U.S. environmental authorities disclosed in September that Volkswagen had been cheating on emissions tests for years by rigging diesel engines to produce lower emissions when being tested than during normal driving, forcing a sweeping shake-up of management and plunging the company into turmoil.
On Wednesday, a U.S. federal court gave preliminary approval to Volkswagen’s $15 billion settlement with U.S. customers, environmental authorities and state attorneys general, the largest class-action settlement ever reached with an auto maker. Final approval is expected in October.
Volkswagen had set aside €16.2 billion, nearly $18 billion, in its 2015 accounts to cover compensation for customers, legal fees and other costs related to the scandal.
The company said in April it didn’t expect further diesel-related costs. The second-quarter charges, though significantly lower than those taken last year, suggest the company had underestimated the full cost of its diesel scandal.
Czech car maker Skoda, Spain’s SEAT, Porsche and the company’s truck division drove Volkswagen’s automotive operating profit higher, compensating for declining earnings at Audi, the Volkswagen passenger car brand, and Bentley.
Lower earnings from its joint ventures in China, the car maker’s biggest market by sales, also hit Volkswagen earnings.
Profit from China is booked as a financial gain, so it doesn’t appear in operating earnings.
Volkswagen said China’s contribution to first-half earnings fell to €2.4 billion from €2.7 billion in the same period a year earlier.
Despite the emissions-cheating crisis, Volkswagen sold more vehicles in the first half of the year and outpaced rivals Toyota and GM to remain the biggest auto maker in the world by sales.
Volkswagen sales rose 1.5% from a year earlier to 5.1 million vehicles, including its namesake Volkswagen brand, Audi luxury cars, Porsche sports cars, Skoda, SEAT, Bentley and Lamborghini.
Toyota, which held the industry crown last year, sold 4.99 million vehicles in the first half of 2016, down 0.6%, and GM sold 4.76 million vehicles world-wide.
Volkswagen briefly pushed past Toyota last year, but fell back after the diesel scandal broke. It again overtook Toyota in the first three months of this year and maintained its lead in the second quarter.
