Volkswagen profits plunge 57% amid diesel emissions scandal
Volkswagen saw its second-quarter profits more than halve as its financial performance took a hammering from the diesel emissions scandal.
The German car manufacturer said pre-tax profits plunged 57% to 1.6 billion euros (£1.3 billion) between April and June, down from 3.7 billion euros (£3.1 billion) over the same period in 2015.
The firm said the VW brand, the group's largest sales division, saw operating profit for the first half of the year tank by 35% to 900 million euros (£758 million), down from 1.4 billion euros (£1.2 billion), as it felt the impact of currency fluctuations, lower sales volumes and higher marketing costs linked to "diesel-gate".
Shares were off more than 2% on the Frankfurt stock exchange.
Frank Witter, the group's chief financial officer, said the firm had delivered "solid results in difficult conditions".
He added that it would "require continued hard work to absorb the significant impact from the diesel issue."
The company revealed in a surprise announcement on Wednesday last week that its operating result before special items rose 7.5% to 7.5 billion euro (£6.3 billion) for the first half of the year.
It also said that it would take a 2.2 billion euro (£1.8 billion) hit to cover ''legal risks'' in America linked to the diesel emissions scandal.
Chief executive Matthias Muller said: "We will work hard on our earnings power to manage the future investments needed to transform our core automotive business and build an innovative business unit for mobility services."
VW's half-year performance showed pre-tax profits dropped 37% to 4.8 billion euros ( £4 billion) compared with the same period in 2015.
The group sales revenues over the period slipped to 107.9 billion (£91 billion), down from 108.9 billion (£92 billion) in 2015.
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 almost 1.2 million vehicles have been impacted in the UK.
Focusing on group operating profit before special items, VW said 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 with last year, as it factors in the impact of the emissions scandal, currency fluctuations and current economic conditions, particularly in South America and Russia.
Volkswagen, based in Wolfsburg, Germany, has already earmarked £12.7 billion to cover recalls and other costs for 11 million cars sold with the emissions 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.