German car behemoth Volkswagen on Thursday reported a slip in profits in the first quarter, but defied a soft patch in the global car market with rising revenues. Net profits at the group fell 7.5 percent between January and March, to just over three billion euros ($3.4 billion).
The group said the bottom line was weighed down by a fresh one-billion-euro charge over "legal risks" related to its "dieselgate" emissions cheating scandal. The charge continues 2018's pattern - when the group booked 3.2 billion euros linked to its 2015 admission to manipulating millions of diesel cars to appear less polluting under test conditions than on the road.
It brings the total cost of the diesel scandal so far in fines, compensation, buybacks and refits to 30 billion euros. Counting out the one-off effect, operating profits before special items grew 15.2 percent in the first quarter, to 4.8 billion euros, on the back of revenues up 3.1 percent at just over 60 billion.
VW managed to lift revenues despite a 6.7-percent drop in unit sales, to 2.6 million vehicles over the quarter. The group said the fatter turnover was due to sales shifting in favour of more profitable models, especially at the flagship VW brand, as well as a strong performance by its financial services division.
Its operating margin - an indicator closely followed by investors - climbed 0.9 percentage points to 8.1 percent. VW was "off to a good start this year," chief financial officer Frank Witter said in a statement. The results were welcomed by the market, with VW gaining 4.7 percent to trade at 162.28 euros, topping the DAX index of blue-chip shares shortly after 11 am in Frankfurt (0900 GMT).
Witter declined to explain the reasons for the new one-billion-euro charge, saying "active legal proceedings" prevented him from discussing them "in the interest of the group and its owners". "The one billion is made up of lawyers' costs, settlements and generally legal questions that remain open," he said.
Looking in more detail at the group's results, its VW brand increased operating profit 4.8 percent, to 921 million euros - a figure that did not include its 400 million-euro share in the legal charge. Meanwhile, earnings at both high-end Audi and luxury Porsche fell.