Abstract:
The troubled German car company once again issued a profit warning, and was subsequently removed from the European blue chip index. Volkswagen (VOW3‑DE) stock price fell on Monday. Volkswagen lowered its forecast for operating return on sales to a maximum of 1% from the previous forecast of 4%‑5.5%. Affected by the news, the stock fell 8.3% last Friday; in midday trading on Monday, the stock price fell another 0.5%. The company blamed the performance pressure on the asset impairment of its large stake in Porsche, the "further deterioration of market conditions (especially in the Chinese market)" and restructuring-related expenses.
Volkswagen added: "Market demand is accelerating towards pure electric vehicles... resulting in performance that is less than initially expected. The Audi and Volkswagen passenger car brands are particularly affected."
In addition, earlier this month the official announced the results of the annual adjustment of the index, and Volkswagen was officially removed from the European Stoxx 50 Index on Monday. The index adjusts its constituent stocks every year to reflect the pattern of leading companies in major industries in the Eurozone.
Volkswagen’s stock price has fallen 27.5% this year and is currently close to its lows since 2010.
Although Volkswagen was approved to advance a new round of large-scale streamlining and reorganization plan earlier this month, it is still difficult to change the decline. Volkswagen is currently facing multiple challenges from shrinking profits, squeeze from local Chinese competitors, tariff issues and electrification transformation.
Deutsche Bank analysts said on Monday that although the profit warning "appears to be very serious at first glance", it "significantly exaggerates the actual deterioration of the core business".
Deutsche Bank pointed out in a research report that Volkswagen's performance forecast includes a one-time factor of 10 billion euros that will impact this year's profits. After excluding this, core business profit margins will still remain at around 4%, and cash generation capabilities will remain intact.
The fact that Volkswagen was removed from the European Stoxx 50 Index reflects the difficult situation of the entire European automobile industry. European car companies are under pressure from rising costs and intensifying global competition. At the same time, they are also struggling to cope with the rapidly changing consumer demand for electric and hybrid vehicles.
A year ago, Stratis, which makes Jeep and Dodge, had already been kicked out of the blue-chip index due to operational problems.
In this European Stoxx 50 Index, Volkswagen’s seat was taken over by Nokia of Finland. With its key position in data center network connectivity, Nokia is fully enjoying the business dividends brought by artificial intelligence.
Comments