FRANKFURT -- Volkswagen reported a first-half operating loss on Thursday after suffering a 27 percent drop in vehicle deliveries due to the coronavirus pandemic, which forced the automaker to slash its dividend.
The automaker posted an adjusted operating loss of 800 million euros ($940 million) in the January to June period, down from a 10 billion euro adjusted operating profit in the year-earlier period, and said it will cut its dividend for 2019.
“The first half of 2020 was one of the most challenging in the history of our company due to the COVID-19 pandemic,” VW Group Chief Financial Officer Frank Witter said in a release.
The company proposed a dividend of 4.80 euros per ordinary share and 4.86 euros per preferred share, down from a previous proposal for 6.50 euros per ordinary share and 6.56 euros per preferred share.
VW predicted a significant decline in full-year sales from 2019 levels, even though it said global sales had staged a gradual recovery as lockdowns eased.
The multi-brand car and truck maker said it expects its 2020 operating result before and including special items to be severely lower than in 2019, albeit in positive territory.
Restoring operations to pre-crisis levels is critical for VW Group after it rolled out a fresh iteration of the important Golf hatchback and plans to start delivering the full-electric ID3 to customers in September.
The success of the ID3 is vital to comply with stricter emissions rules in Europe and catch up with Tesla, which in recent weeks zoomed past traditional manufacturers to become the world’s most valuable automaker.
Separately, French rival PSA Group on Wednesday delivered a second-quarter profit and reiterated its goal of achieving margins of over 4.5 percent in its automotive unit this year, even though these were down to 3.7 percent in the first half.
The dividend cut is meant to conserve cash after VW burned through 2.3 billion euros in the second quarter, the period worst hit by the pandemic.
Revenue slumped 37 percent to 41.1 billion euros in the three months through June, roughly in line with analyst estimates compiled by Bloomberg.
The group swung to a 2.39 billion euro loss in the second quarter, from a 5.13 billion profit a year earlier.
VW stuck to its lowered forecast from April that sees global deliveries, revenue and operating profit falling “severely” this year, but the manufacturer still expects to make a profit on a full-year basis.
That’s largely because markets have started to recover, with July deliveries down by less than 10 percent after buyers returned to showrooms in several countries, the company said.
The company’s Porsche brand proved relatively resilient in the first half, recording an operating profit thanks to deliveries that declined just 15 percent.
VW Group subsidiary Audi swung to an operating loss in the first half after sales plummeted. The premium-car division embarked on a deep restructuring last year to revive squeezed margins at what used to be VW Group’s biggest profit contributor. Its new CEO Markus Duesmann this month pledged to seize the virus-related slump to make the automaker more nimble.
While Volkswagen seeks to more than double its market capitalization to 200 billion euros, it’s currently worth just over 70 billion euros after shares slumped by about a fifth since the beginning of the year.
Reuters and Bloomberg contributed
