Volkswagen Sales Outlook Lifted on Rise in Profit

Germany-based Volkswagen AG posted an increase of 17% in operating profit for the third quarter that was better than had been expected on its strong earnings from Porsche, Skoda and from joint ventures inside China. This increase in profit was prior to special items.

Volkswagen shares were down slightly in trading after one of its biggest profit engines, Audi AG warned Thursday costs that were higher than had been expected related to the recall of Takata air bags.

Analysts said that VW is having troubling controlling its costs.

The capital expenditure of the automaker remains too high, which in turn weakened the quality of its results, said on industry analysts in Germany.

VW said that operating profit prior to special items increased to 3.75 billion euros during the just ended third quarter in comparison to the 3.21 billion euros one year ago.

Volkswagen was able to swing back to a net income that reached 2.28 billion euros following a loss a year ago for the same quarter of 1.73 billion euros.

Revenue at the automaker was up 1% ending the three-month period at 52 billion euros.

Charges of more than 442 million euros were taken by the company during the quarter in anticipation of the legal costs to be associated with its vehicle recall across that U.S. that were not part of the settlement of $14.7 billion approved earlier this week.

Last year VW said that it had installed devices into its diesel-powered engines to fool emissions testing machines.

The additional charges knocked it operating profit down after taking into consideration special items from 3.48 billion euro last year to 3.31 billion for the just ended quarter.

The company lifted its sales outlook for the complete year, saying its revenue could reach last year’s 213.3 billion euros. The company had previously said it was expecting revenue to drop by up to 5%.

Analysts now are expecting that Volkswagen’s operating profit margins for the full year will be in the upper end of the automaker’s target range that is between 5% and 6%.

Frank Witter the company CFO said that the strong cash flow of the company gave it the ammunition needed to deal with its crisis over the diesel engines, but added that more significant improvements were needed in productivity as well as profitability across the entire group.

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David Glass

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