The net cash flow in 2022 was significantly lower than in the previous year.
(Photo: Reuters)
Dusseldorf Europe’s largest car manufacturer, Volkswagen, was able to further increase its profits in the past fiscal year despite the war in Ukraine and the energy crisis. However, delivery bottlenecks meant that the group missed an important self-imposed cash flow target. This is shown by the first key data of preliminary figures for 2022, which VW published in an ad hoc announcement on Tuesday evening.
Accordingly, the operating result before special items increased by 12.5 percent to 22.5 billion euros compared to the previous year. The car manufacturer is also increasing in terms of sales – from 250 to 279 billion euros. The group thus largely met the expectations of most analysts.
According to the announcement, Volkswagen expects a return on sales of around 8.1 percent. This is also roughly in line with expectations. Volkswagen has not yet announced the bottom line profit. The group will publish its annual report with the final figures in mid-March. At the start of the stock market on Wednesday morning, VW shares fell by 1.9 percent.
What is striking: Volkswagen sold fewer cars in 2022, but was still able to increase sales. For months, a lack of chips and parts has meant that the group has been able to sell significantly fewer vehicles than usual.
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VW uses the rare chips – like all German car manufacturers – primarily in models with high margins, including cars from Audi or Porsche and less compact models like the VW Golf. In 2022, for the first time in decades, this was no longer the best-selling car in Europe. Overall, worldwide deliveries at VW 2022 fell by seven percent to almost 8.26 million units, as the company announced in January.
The only growth region was Asia-Pacific – albeit without VW’s most important sales market, China. The group’s deliveries there had recently fallen to a nine-year low of 3.18 million vehicles. The strict zero-Covid policy and recurring lockdowns had thrown the entire industry back. For 2023, the situation for VW in China should improve.
Volkswagen: Net cash flow issues
The worldwide delivery bottlenecks at VW in the past year also meant that the group had to put up with a damper on the inflow of funds. The net cash flow of five billion euros last year was well below the 8.6 billion euros achieved in the previous year.
For CEO Oliver Blume, it is the first time that he has not achieved an important key figure as CEO of VW. Blume has been in office since September 2022 and, in addition to the VW Group, also heads the sports car manufacturer Porsche, which went public in autumn 2022. The VW subsidiary is currently worth more on the stock exchange than the parent company.
Based on this model, other brands and units of the Group are currently developing so-called virtual “equity stories”, i.e. simulated IPOs. In January, Blume said in the Handelsblatt that, in addition to the key return figures, his focus was “particularly on the net cash flow and the break-even point”.
The low net cash flow is “mainly due to the unstable supply situation throughout 2022 and disruptions in the logistics chains, especially at the end of the year,” the statement said. For 2023, Volkswagen expects the situation to reverse for the most part over the course of the year. It is primarily external factors that are financially clouding the VW boss’s first year.
At the end of the year, Volkswagen had net liquidity of around 43 billion euros in its core “Automobiles” business, significantly more than the 26.7 billion euros in the previous year. However, this also includes the approximately 16 billion cash inflows from the Porsche IPO in September.
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In previous years, VW had presented significantly more context and details in its preliminary annual figures. “What is clear, however, is that despite our already cautious stance on cash flow, fourth-quarter earnings were significantly worse than expected,” said Patrick Hummel, an analyst at UBS. The expert expects subdued demand in Europe. “We believe the market will take the slightest sign of overproduction as a reason to worry about prices and margins.”
Most recently, VW boss Blume had given a clear rejection of a price war with competitors like Tesla. In the case of cars with electric drives, the VW group brands achieved an increase of a good 26 percent to more than 572,000 vehicles compared to the previous year. Nevertheless, the US competitor Tesla and the Chinese brand BYD are clearly ahead of Volkswagen in terms of global registration figures for electric cars.
What should give VW financial peace this year is the high order backlog. Because of the chip crisis and delivery bottlenecks, VW has a total of 1.8 million orders in its books in Western Europe alone, including 310,000 electric cars, as the group recently announced.
Six important analysts currently rate the VW share as a buy, just as many advise holding the share, and one analyst rates the paper as a sell. The six-month trend points to Buy.
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