After-hours VW shares are up: Volkswagen can increase profits sharply – high dividend

As the Wolfsburg-based company announced on Friday evening, based on preliminary figures, the profit of Europe’s largest car group rose by almost 75 percent to 15.4 billion euros compared to 2020. Sales also increased after the corona-related difficulties of the previous year. It grew by 12.3 percent to 250.2 billion euros.

VW was able to convince with the operating margin, which is highly regarded on the stock market. Before interest, taxes and special items, eight percent of sales remained as profit – more than analysts had previously estimated on average. This year, VW is targeting the range of 7 to 8.5 percent, which is roughly what the experts had on the slip of paper. The dividend proposal is surprisingly high at EUR 7.56 per preferred share. The share, which is listed on the DAX, rose by 2.2 percent on the Tradegate trading platform compared to the Xetra close. The outlook for 2022 is very solid, judged JPMorgan analyst Jose Asumendi. However, the payout ratio of less than 30 percent could raise questions among investors.

Many VW car 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 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.

While the financial figures improved significantly in 2021, the group performed worse in terms of 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 almost 17 percent in January and February.

The Toyota Motor Group delivered about 10.5 million cars 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 have weighed heavily on the industry in recent months. The shortage is likely to continue for a while. Antlitz was relatively confident: “We can see that the supply of semiconductors will improve, especially in the second half of the year.” The lack of chips remains a structural problem.

The ambitions for the new year are big. The VW top expects – if things go well – with a higher earning power, sales should increase by 8 to 13 percent. “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.”

At VW, for example, some locations are already dry because there are no cable harnesses manufactured in western Ukraine. After the plants in Saxony, there should again be missed shifts and short-time work at the Wolfsburg headquarters. “We’re still getting some supplies at the moment, but of course it’s difficult,” said the chief financial officer about the situation in Ukraine. “We are trying to support the suppliers. However, there will be further restrictions over the next few days. We are also working on strategies to switch to other suppliers in Europe and North America.”

It cannot be ruled out that some of the rising energy prices will eventually have to be passed on to consumers. Appropriate hedging transactions ensured 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.”

The management had ruled out new austerity programs after a dispute between works council chief Daniela Cavallo and CEO Herbert Diess at the end of last year. If costs need to be reduced further, then only within the framework of existing agreements. A five percent reduction was planned by 2023. With regard to Ukraine, Antlitz said that the major investment projects would last. But: “If the crisis persists, there may be a situation where you have to make significant adjustments to the normal fixed costs.”

Above all, Diess strives for higher productivity and efficiency. At the same time, the group is investing a high double-digit billion sum in digital and e-models over the next five years. At the end of 2021, the VW Group had around 672,800 employees.

Like many other companies, Volkswagen initially wants to suspend production in Russia. The same applies to car exports to the country. Diess warned that the war could have even more severe effects on the European economy than the Corona crisis. A prolonged military conflict would probably hit the region “much worse” than the spread of the Covid 19 pathogen, the manager recently told the Financial Times. Permanently damaged global supply chains are likely to lead to “huge price increases, energy shortages and inflation”. “That could be very risky for the European and German economy.”

For the time being, the profits are bubbling up again – the shareholders should benefit from this. 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. The umbrella company Porsche SE, in which the Porsche and Piëch families have bundled their shares in VW, expects a pre-tax inflow of around 1.18 billion euros from the distributions.

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 German leading index Dax (DAX 40) 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.

WOLFSBURG (dpa-AFX)

Image sources: Gl0ck / Shutterstock.com, FotograFFF / Shutterstock.com