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Volkswagen Q1 Hurt By Covid-19 Impact; Sees Profit In FY20; Stock Up

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Shares of Volkswagen Group (VKW.L,VLKAF.PK,VOW.BE) were gaining around 3 percent in German trading after the automaker said it expects a profit in fiscal 2020, despite being severely hit by Covid-19 pandemic. The company's first-quarter results were substantially lower from the prior year as demand plunged amid the coronavirus-related lockdowns across the world.

CFO Frank Witter said, "We've taken numerous countermeasures to cut costs and ensure liquidity and we continue to be robustly positioned financially. The gradual restart, also of our factories outside of China, has begun.... In Germany, the dealers have reopened since last week. We have thus taken initial steps together to get the business up and running again."

Volkswagen Passenger Cars brand resumed vehicle production at its Wolfsburg plant early this week at 10 to 15 percent of capacity. The company plans to increase production to around 40 percent the following week.

For the year, Volkswagen expects operating profit to be sharply lower than last year. Sales revenue and deliveries to customers are also expected to be significantly below the prior year.

Along with the Covid-19 impact, the company expects the annual results will reflect various challenges including increasing intensity of competition, volatile commodity and foreign exchange markets and more stringent emissions-related requirements.

For the first quarter, earnings before tax plunged to 0.7 billion euros from 4.1 billion euros, previous year. There were no special items in the first quarter of 2020, while prior year results included 1 billion euros of special items as a result of the diesel crisis.

Operating profit before special items decreased significantly by 81.4 percent from last year to 0.9 billion euros. The operating return on sales was 1.6 percent.

First-quarter sales revenue declined 8.3 percent to 55.1 billion euros from prior year's 60.0 billion euros. Deliveries to customers decreased 23 percent to 2.0 million vehicles, especially in Asia-Pacific and Europe.

The Volkswagen Passenger Cars brand's sales revenue fell 11.9 percent to 19.0 billion euros as deliveries declined 16 percent to 765,000 vehicles.

Unit sales by the Audi brand fell to 268,000 vehicles from last year's 305,000 vehicles. The Chinese joint venture FAW-Volkswagen sold a further 97,000 Audi vehicles, lower than last year.

The Bentley brand unit sales, however, grew to 3,302 vehicles from prior year's 2,584 vehicles.

In Germany, Volkswagen shares were trading at 130.50 euros, up 3.34 percent.

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