Good news about Volkswagen
08 March 2023
Last Friday, the Chief Financial Officer of the Volkswagen Group (holding a 6.7% stake) shared the group's expectations for the year 2023. Vehicle sales are projected to increase by 15% to reach 9.5 million units.
Our investment thesis includes the statement: "a significant upside in sales and margins in the event of an adjustment in the volumes of vehicles sold."
Let us explain why
Over the past three years, the volumes of vehicles sold by the VW group have experienced a sharp decline. The pandemic, supply chain disruptions, and the Russo-Ukrainian conflict have greatly impacted the production and delivery capabilities of automotive manufacturers.
However, the group's revenue has continued to grow, reaching €280 billion in 2022 compared to €250 billion in 2019, despite a 25% decrease in volumes.
This can be attributed to the price. Over the past three years, the average price of vehicles sold by the group has increased from €20,000 to €28,000. This increase has more than compensated for the decline in volumes.
But these volumes were not meant to decline indefinitely. The lingering effects of the pandemic are dissipating, particularly in China. The situation in the supply chain is improving, and the manufacturers have taken measures to reduce their dependence on production zones in Ukraine. Consequently, Volkswagen expects a return to selling 9.5 million vehicles this year.
The impact on sales is significant: projected revenue of €315 billion. Moreover, the profit margins are increasing (easier absorption of fixed costs), with an expected operating profit of 8%. The analyst consensus had previously settled at 7.1%.
This has given the management enough confidence to raise the dividend to €8.70 per share, up from €7.50 previously.
The share price rose by 11% on that day.
This is indeed good news.
Disclaimer
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