VW profit improves as it puts scandal in rearview

Strong earnings enable investments in new tech

FRANKFURT— Volkswagen’s profit more than doubled in the second quarter as the German carmaker benefited from a growing European economy and moved past one-time costs for its diesel emissions scandal in the U.S.

After-tax profit rose to € 3.2 billion ($4.7 billion) from € 1.2 billion in the same quarter a year earlier. Last year’s result was burdened by € 2.2 billion in costs from the diesel scandal. No such one-time charges were reported for this year’s quarter.

Despite the rise, the profit was short of the € 3.3 billion foreseen by market analysts as compiled FactSet.

Sales for the group and all its brands, which include Volkswagen, Audi, SEAT, Skoda, Bentley and Lamborghini, rose 4.7 per cent to € 59.7 billion. CFO Frank Witter said Thursday that the results were boosted by increased sales during the first half of the year “above all in Europe, and also in North and South America, which is particularly encouraging.”

Witter said the strong earnings would enable the company to invest in new technologies and business models to cope with a rapidly changing industry. Carmakers are investing heavily in developing batterypowered and self-driving cars as well as app-driven approaches to transportation that involve ordering rides using a smartphone but not necessarily owning a car.

“These do not look like the results of a company that’s under pressure,” said analyst Max Warburton at the Sanford C. Bernstein research firm, who described the figures as “solid.”

For the first six months of the year, operating earnings at the core Volkswagen brand rose to € 1.9 billion from

€ 900 million in the first half of 2016. The unit benefited from cost controls and a strong model mix with more profitable vehicles including the Jetta sedan and the Tiguan SUV.

The mass-market brand Skoda also did well, increasing its operating profit by 25 per cent. That helped offset flat results at the luxury branch, Audi.

Overall, the company lost market share in Western Europe, to 21.6 per cent from 22.1 per cent, as sales growth fell short of the wider market’s expansion. That was due both to a changeover to a new model of the Volkswagen Golf, which cost the company sales of a high-volume product, and “customer trust, which has not been completely regained as a consequence of the diesel issue.”