Volkswagen:Quarterly Results/2022 Q4

See also: Volkswagen / Earnings Season:2022 Q4

Previous Quarterly Results: 2022 Q3

Publishing date: March 14, 2023

Results

Volkswagen Group 2022 revenue came in in-line with analysts estimates and slightly below the management upper guidance. Revenue was EUR 279.2 billion (+12% year-on-year) versus analysts estimate of EUR 278.37 billion (+11.3% year-on-year) and management upper guidance of EUR 282.7 billion(+13% year-on-year).

Operating Profit and operating profit margin were 22.5 billion euros and 8.1% respectively. Operating profit margin was above the mid-point guidance of 7.75%.

The company gave revenue guidance for 2023 that exceeds Yahoo Finance analysts estimate as it expects supply bottlenecks to gradually ease. Volkswagen expects this year's revenue to grow by 12.5% at the mid-point to reach EUR 319 billion, above analyst's estimate of EUR 281.84 billion(+0.94% y/y).

It also expects deliveries to reach 9.5 million vehicles in 2023. That is growth of 15% in deliveries compared to the prior year. Meanwhile operating margin is to come in between 7.5 and 8.5%.

Volkswagen announced that it will invest $192.6 billion (180 billion euros) between 2023 and 2027. More than a third of this will go to electrification and digitalization.

Key items	2022	Y/y growth	2023 Guidance	y/y growth
Revenue	EUR 279.2 billion	12%	EUR 319 billion	12.5%
Operating profit	EUR 22.5 billion	13%
Operating profit margin	8.1%		7.5%-8.5%
Vehicle deliveries	8.3 million	-7%	9.5 million	14%
Net Cash flow	EUR 5 billion		EUR 6-8 billion

Highlights from the conference call transcript

-CFO Arno Antlitz:

"Our sales volumes were at the weak level of the previous year due to various restrictions and distortions in the supply chain and the continued shortage of semiconductors. "

"We had to absorb write-downs in connection with the closure of our business in Russia in the order of €2 billion and the cost associated with the very successful IPO of Porsche amounted to around €0.5 billion."

"Raw material costs for steel, aluminum or battery raw materials have become considerably more expensive compared to 2021. For the year as a whole, the resulting increase in product cost had a negative impact of almost €8 billion on the operating profit."

"Important core economic indicators such as growth prospects in the individual regions, our expected inflation rates remain challenging. On the other hand, we expect that in 2023, the structural shortage of semiconductors will improve and the supply with raw materials and logistics will gradually stabilize. The latter one is within our clear focus."

He noted that in Q4 they were hit with a huge amount of product costs, which affected net cashflows.

"In terms of the R&D CapEx combined over time, we expect the peak in 2025 – 2024-2025 and from there on, significant like reduction year-over-year."

"First quarter start, we had a decent start into the first quarter in terms of sales, specifically in Europe and the rest of the world. China was weak, but in China, also the overall market was weak. It was not only Volkswagen situation."

"We expect also the first quarter to be within the bandwidth of 7.5% to 8.5%." (refers to operating margin)

"We have this order backlog of 1.8 million to almost 2 million cars."

He pointed out that VW expects to outperform the market in 2023(15% growth in deliveries versus 8% market growth).

"So I expect Q3, where demand and supply will meet and that better supply that will be true for all of the companies. So there will be more competition. And this is what I said, we’re preparing for that. We see high raw material prices. We see other price increase, and it will be more difficult to pass on these price increases to the customer. This is what I am preparing or we are preparing our teams for. So, we have to refocus on productivity, we have to have a refocus on fixed cost discipline on pricing and on cost work. That doesn’t mean that we want to lose the basically discipline on pricing and incentives. But it will be more competition throughout this year. And what I said before, we really prepare our company and our teams for this increased competition."

He told an analyst that he should expect VW to be in the midpoint of the 2023 guidance that they gave.

"The typical cash flow we could expect in the current situation and giving the EBIT guidance and the upfront investment for electrification and digitalization would be €8 billion to €9 billion. And you theoretically should add the reversal of the situation we had last year on the inventory side. So, that basically leads to €12 billion to €13 billion adjusted. But in that €12 billion to €13 billion or from that €12 billion to €13 billion, we basically deduct an additional of €5 billion for which is reserved for PowerCo, which comes on top to our current core business. And then that leads us into the guidance of €6 billion to €8 billion."

-Oliver Blume:

"We implemented a program to stabilize our supply chain, which is paying off."

"We won’t push the products into the market in terms of pricing situation and that is my position that we drive the company more market-driven than production-driven. "

" We are able to see it in Europe that the situation for Volkswagen Group is better than last year."

"In China, we’re expecting a very strong second, second half year."

"We have to work on profitability and on the cost side on ID.3, ID.4, ID.6 in China, both in terms of material costs, in terms of battery, in terms of production costs in order to increase competitiveness there."

Assessment

Moritz: I think Volkswagen coming in at the lower end of the guidance range could be a result of significant euro currency headwinds as those have not been expected. See 2022 Q3

Expectations

Management Guidance

Key items	2022	Y/y growth
Revenue	EUR 270.2-282.7 billion	8-13%
Operating profit margin	EUR 18.9-24.0 billion	7-8.5%

Analysts estimates

Key items	2022	Y/y growth	2023	Y/y growth
Revenue	EUR 278.37 billion	11.3%	EUR 281.84 billion	0.94%

Competitor expectations and results

BMW:Quarterly Results/2022 Q4

Daimler: Quarterly Results/2022 Q4