Falling margins hold back profit growth at Volkswagen
By Benjamin Chiou
Date: Wednesday 13 Mar 2024
(Sharecast News) - Volkswagen has described its 2023 results as "robust" amid a challenging environment, as a strong showing from its core and luxury brands offset was able to offset at declining profits at non-core brands including Audi and its software arm.
The German auto giant said total sales increased by 15.5% to €322.3bn last year, though operating profits improved by just 2.1% to €22.6bn as operating margins slipped to 7.0% from 7.9% in 2022.
The company delivered a total of 9.36m vehicles in 2023, up 10.4% year-on-year, as all divisions saw growth in deliveries.
The so-called 'Brand Group Core' division, which comprises Volkswagen, Volkswagen Commercial Vehicles, Škoda and SEAT/CUPRA, saw sales jump 21% to €137.8bn, while operating margins rose to 5.3% from 3.6%, with the company continuing to target returns of 8% over the long term.
However, while sales at the Brand Group Progressive division, comprising Audi, Lamborghini, Bentley and Ducati, rose 13% to €69.9bn, profits fell sharply as operating margins dropped to 9.0% from 12.3%.
Meanwhile, the luxury division which houses Porsche saw an 8% increase in sales to €37.3bn and a stable operating margin of 18.6%.
Elsewhere, the company's software unit Cariad increased losses to €2.4bn from €2.1bn previously, while the battery division saw losses swell to €417m from €121m.
"In 2023, we have established a solid foundation. We are aware of our current challenges and are tackling them rigorously in order to leverage the enormous potential of the Volkswagen Group," said chief executive Oliver Blume.
"The Volkswagen Group is entering the long-distance race of transformation from a position of strength. We are now preparing the group for sustainable positive development."
Shares were down 1.2% at €136.55 by 1127 in Frankfurt.
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