Volkswagen (VOWG_p.DE) experienced a notable setback on Monday as its shares plummeted by more than 3%, marking their lowest point since April 2020.
This sharp decline came in response to the German automaker’s announcement of a downward revision in its profit margin outlook for the current year, a development that left some investors disappointed.
The primary factor cited for this adjustment was the negative impact stemming from raw materials hedges.
Europe’s largest automotive conglomerate disclosed a new projected return on sales ranging between 7.0% to 7.3%, a significant reduction from the earlier forecast of 7.5% to 8.5%.
It is worth noting, however, that Volkswagen has maintained its outlook for deliveries and sales.
Deutsche Bank weighed in on this news, anticipating that consensus estimates would undergo a “low-single digits” reduction.
Nonetheless, the bank interpreted Volkswagen’s unwavering commitment to its delivery targets as a sign of the company’s underlying confidence.
Tim Rokossa, an analyst at the German bank, pointed out the potential volatility associated with derivatives, both positive and negative, but concluded that the warning should be regarded as specific to Volkswagen rather than indicative of broader trends within the automotive sector.
By 0800 GMT, Volkswagen shares had fallen by 3% in Frankfurt, becoming the leading decliner in the European auto sector (.SXAP), which experienced an overall decline of 1%.
Volkswagen attributed its profit margin downgrade to the impact of raw materials hedges, resulting in a substantial non-cash loss of 2.5 billion euros ($2.65 billion) that the company will be unable to offset by the end of the year.
Despite this setback, Volkswagen reported a robust performance in the third quarter, with sales experiencing a 12% growth to reach 78.8 billion euros, while operating profit surged by 14% to 4.9 billion euros.
Investors and industry watchers will be eagerly awaiting the release of the full quarterly financial figures scheduled for Thursday to gain further insights into Volkswagen’s overall performance and outlook.