Volkswagen operating profits rise as SUV push pays off

Volkswagen Group shares rose two percent after the German carmaker posted a 30 percent rise in second-quarter operating profit despite a drop in vehicle sales as rising demand for sports utility vehicles and premium brands boosted margins.

Volkswagen bucked a trend of falling demand for passenger cars by launching a range of higher-margin sports utility vehicles at a time when demand for sedans is falling.

Daimler, Aston Martin and parts supplier Continental warned on profits this week.

“Very solid and clean set of numbers, marginally ahead of consensus,” Jefferies analyst Philippe Houchois said about Volkswagen’s earnings in a note on Thursday.

The Wolfsburg, Germany-based company’s operating profit rose to 5.13 billion euros ($5.71bn), up from 3.94 billion euros ($4.38bn) in the second quarter last year. It was boosted by the absence of a diesel charge VW booked in the year-earlier period.

Volkswagen reiterated it expects vehicle deliveries in 2019 to exceed a prior-year figure and for revenue in the passenger cars and commercial vehicles divisions to grow at least five percent.

VW said it continues to expect an operating return on sales in the passenger cars area and the group of between 6.5 percent and 7.5 percent. It reiterated that after special items, it expects the operating return on sales to be at the lower end of the expected range for the group and the passenger cars business area.

Peugeot said on Wednesday it had delivered an operating margin of 8.7 percent in the first half of 2019, without releasing a more detailed breakdown of quarterly results.

By contrast, Volkswagen Group’s operating return on sales rose to 7.2 percent in the first half, up from 6.8 percent in the year-earlier period.