By David Sachs


Volkswagen Group reported a lower operating margin and profit for its Audi unit but its flagship division increased profitability.

The German carmaker said Wednesday that the Audi division posted an operating return on sales of 9% in 2023 compared with 12.3% in 2022 as the premium group suffered from high material costs and effects from commodity hedging. Operating profit decreased to 6.3 billion euros ($6.89 billion) from EUR7.6 billion for the unit, which includes the Audi, Lamborghini, Bentley and Ducati brands.

Adjusted for commodity hedging and currency effects, operating profit reached EUR7.7 billion with a return on sales of 11%. Revenue for the division rose 13% to EUR69.9 billion.

Volkswagen's core brand group reported a 2023 operating margin of 5.3%, up from 3.6%, on a jump in revenue, but admittedly below some competitors, Chief Financial Officer Arno Antlitz said during a press conference.

Sales rose 21% to EUR137.8 billion for the mass-market division, which is comprised of Volkswagen, Volkswagen Commercial Vehicles, Skoda, Seat and Cupra. The unit finished the year with an operating result of EUR7.27 billion compared with EUR4.045 billion a year prior.

The car-making giant said that vehicle sales in the Asian-Pacific region were flat at 3.6 million. But revenue fell to EUR50.1 billion from EUR51.4 billion amid intense competition. The figure omits revenue from its Chinese joint ventures.

Volkswagen also set a lower operating profit target for its Chinese joint ventures in a fiercely competitive market. The carmaker expects the proportionate operating profit of between EUR1.5 billion and EUR2 billion for its joint ventures in the world's biggest car market, versus a total of EUR2.6 billion in 2023, UBS analysts said in a note. The weak guidance could result in consensus downgrades to earnings per share by up to 5%, the analysts said.

Cariad, Volkswagen Group's software arm, posted an operating loss of EUR2.4 billion. The result stemmed from the division's business model, which includes advanced payments for future software architecture, the company said. Revenue from software licenses rose by about 30% to EUR1.1 billion.

Chief Executive Oliver Blume said during a press conference that he has cut some red tape in the troubled software unit and that the company is considering partnerships with major tech companies.

Volkswagen said that PowerCo, the company's battery business, recorded an operating loss of EUR400 million and a net cash outflow of EUR800 million.

"This relates to investments in the Group's battery activities, which are essential for the successful ramp-up of electric vehicle production," Volkswagen said.

The financial-services division posted an operating profit of EUR3.8 billion, down from EUR5.6 billion in 2022 on lower used-car sale prices after a spike caused by the chip shortages in 2021 and 2022.

The company also said it will now aim to achieve a carbon-neutral balance sheet at its production sites worldwide by 2040, 10 years ahead of the previous goal.

Volkswagen reported other key financial results from 2023 earlier this month.


Write to David Sachs at david.sachs@wsj.com


(END) Dow Jones Newswires

03-13-24 0624ET