FRANKFURT -- Volkswagen Group warned investors about a tough year ahead as the 12-brand car and truck group reported preliminary annual results that were weighed down by currency headwinds and supply bottlenecks caused by new emissions-testing rules.
VW suffered from an increase in inventories at its Audi and VW brands after a new emissions testing procedure, known as WLTP, took effect in Europe in September and delayed road certification for many of its vehicles.
"The headwinds in key markets are expected to strengthen further in 2019," CEO Herbert Diess said on Friday in a statement. "Overall, however, we will have to redouble our efforts to meet our ambitious targets in the new fiscal year.”
Volkswagen, which is still battling to recover from a 2015 scandal over emissions test cheating, reiterated it wanted to achieve an operating return on sales of between 6.5 percent and 7.5 percent for the passenger cars division and the group this year, a step welcomed by analysts.
"The results are pretty solid, and it's positive that they stick to their margin forecast especially when contrasted with rivals like Daimler which was more cautious," said Nord LB analyst Frank Schwope, who has a buy rating on the stock.
VW is proposing a dividend of 4.80 euros a share for ordinary stock and 4.86 euros for each preferred share, the company said. In fiscal year 2017 VW paid shareholders 3.90 euros per ordinary share and 3.96 per preferred share.
Vehicle deliveries are expected to rise slightly in 2019, and group revenues are seen up to 5 percent higher, Volkswagen said.
Volkswagen's 2018 operating profit came in at 13.92 billion euros ($15.8 billion), only 0.7 percent higher than the prior year and below 14.53 billion euros forecast in a poll.
VW said it expected positive net cashflow for 2019 thanks to lower penalties and compensation payments related to the company's diesel-cheating scandal even as it faces 80 billion euros in investments to mass produce electric cars.
Analysts said Volkswagen's free cashflow was negative for the full year and down 3.8 billion euros in the fourth quarter, suggesting there was no meaningful reduction in inventories.
U.S tariffs, truck IPO
VW would be hit by potential new tariffs on cars imported to the U.S. Among German automakers, VW’s two largest earnings contributors Porsche and Audi are most exposed should U.S. President Donald Trump impose a 25 percent tariff. In a worst-case scenario, VW could suffer a profit hit of as much as about 2.5 billion euros ($2.8 billion), Diess has said.
The company was committed to invest more in the U.S. and would do "all we can" to avoid import duties, he said.