German auto giant Volkswagen (OTC:VWAGY) reported Wednesday that its third-quarter operating profit had jumped 68% to 4.5 billion euros ($5 billion) thanks to strong sales of SUVs and Porsches, as well as lower expenses related to the diesel-emissions scandal. But it dialed back its forecast for deliveries for the full year due to concerns about slumping global demand.

The raw numbers

Metric Q3 2019 Change (YOY)
Revenue 61.42 billion euros 11.3%
Vehicles delivered (thousands) 2,640 1.1%
Operating profit 4.541 billion euros 67.5%
Operating profit margin 7.4% 2.5 pp
Net income 3.986 billion euros 44.2%
Operating cash flow, automotive 7.398 billion euros 56.6%

Data source: Volkswagen AG. As of Oct. 30, 1 euro = $1.11. YOY = year over year. pp = percentage point.

How Volkswagen's key business units performed in Q3

  • VW Passenger Cars generated 866 million euros in operating profit, up sharply from just 200 million euros a year ago, when diesel-related fines and a change in Europe's new-car testing protocol hit the brand's earnings hard. Sales rose 5.6%, with the gain driven by strong results for the brand's SUVs, including the U.S.-made Atlas. 
  • Audi's operating profit of 939 million euros was up 3.2% from the year-ago period on an improved mix of products sold and cost reductions. Including Audis produced by VW's joint venture with Chinese automaker FAW, the brand sold about 440,000 vehicles, down 3.7% year over year.
  • Porsche's global sales rose 3% to about 69,000 vehicles, but higher costs related to future products and unfavorable currency exchange rates pushed its operating profit down 4.4% to 1.08 billion euros.
  • VW Commercial Vehicles sold about 88,000 vehicles, down slightly from a year ago. But product-development costs resulted in a loss of 9 million euros, versus a profit of 61 million euros in the year-ago period.
  • VW Financial Services, the company's captive financing subsidiary, earned 754 million euros, up 10.2% from a year ago. The unit's penetration rate (the percentage of VW sales that used its services) was 34.5% through the first three quarters of 2019, up from 34.2% in the year-ago period.
A white Porsche Cayenne, a luxury-sports crossover SUV.

Sales of Porsche's profitable Cayenne SUV were up 25% this year through September. Image source: Volkswagen AG.

Special items and net liquidity

VW took a one-time charge of 275 million euros in Q3 for legal and other expenses related to its diesel-emissions scandal. It took scandal-related charges of 800 million euros in Q3 2018. 

As of Sept. 30, VW's automotive division had net liquidity (cash minus debt) of 19.8 billion euros, up from 15.9 billion euros as of June 30. 

Why VW trimmed its 2019 guidance

The company said it now expects vehicle markets in many parts of the world to contract more quickly than it had previously anticipated. It said that auto sector investors should no longer expect year-over-year growth in deliveries, but it maintained its prior guidance for revenue and operating margin.

For 2019, VW now expects:

  • Deliveries "on a level" with 2018. (Prior guidance: "slightly higher.") (2018 result: about 10,834,000.)
  • Automotive revenue up to 5% higher than 2018's 201.07 billion euros.
  • Operating margin before special items: 6.5% to 7.5%. (2018 result: 7.3%.)