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VW shares up after higher than forecast results despite new diesel emissions hit

Published 20/07/2016

Shares in VW soared 6% in Frankfurt
Shares in VW soared 6% in Frankfurt

Volkswagen has driven home a better-than-expected set of results, despite taking another 2.2 billion euro (£1.8 billion) hit for the diesel emissions scandal.

Shares in VW soared 6% in Frankfurt after it issued a surprise announcement showing its results were "significantly higher" than the market had predicted, with its operating result before special items hitting 7.5 billion euro (£6.3 billion) for the first half of the year.

However, the firm said it would pay out 2.2 billion euro in special items to cover "legal risks" in America linked to the emissions scandal.

The financial blow is the latest in a series of mammoth payouts made by the company, as it continues to grapple with the fallout of the scandal exposed by US regulators.

The German carmaker said it had stepped up its performance in the first half of the year thanks to stronger demand for VW cars in the second quarter.

The company said: "The key difference in the group operating result before special items to market expectations relates among others in particular to improvements in the result of the Volkswagen brand in the second quarter, especially in comparison to the weak first three months.

"Causal factors include demand seasonality, the improved car market in Europe, as well as the return of orders from large corporate fleets that we had forecasted."

In June, VW agreed a record 14.7 billion dollar (£11 billion) settlement in America over its diesel emissions scandal which will see owners paid up to 10,000 US dollars (£7,500) each in compensation.

The firm estimates that almost 1.2 million vehicles have been impacted in the UK.

Focusing on its group operating profit before special items, VW said its operating return on sales would come in between 5% and 6% this year.

The group said it expects sales revenue to be down as much as 5% compared to last year, as it factors in the impact of the emissions scandal and the current "economic conditions", particularly in South America and Russia.

Volkswagen, based in Wolfsburg, Germany, is still facing billions more in fines and penalties, as well as possible criminal charges.

The company has already earmarked £12.7 billion to cover recalls and other costs for 11 million cars sold with the software globally.

The scandal was exposed last year when US regulators revealed that Volkswagen had fitted many of its cars with software to cheat emissions tests.

Investigators found that the cars emitted more than 40 times the legal limit of nitrogen oxide, which can cause respiratory problems.

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