VW’s EBT Reduces By 19.3% During First Quarter of 2016 Following ‘Dieselgate Scandal’

Volkswagen AG (VW), the German automobile manufacturer has reported a 19.3% fall in profit during the first quarter of 2016 compared to a year ago. The profit shortfall takes place as an ominous outcome of diesel mission scandal.

The Wolfsburg based company has recorded €3.2 billion (£2.4 billion) earning before tax (EBT) during the first three months of the current year. The world’s second largest automaker has posted EBIT of €3.97 billion during the same quarter of the previous year.

Matthias Mueller, chief executive for VW has expressed his satisfaction with the start of a demanding year. VW has been grappling with an emission deceiving scandal following admission for using cheat devices to deceive US emission tests.

The German automobile giant has already been agreed to count penalty for €16 billion centering the emission scandal. It has dealt with the US Department of Justice to buy back and substantially compensate 500,000 American consumers affected by the cheating. The VW CEO’s success is to limit economic impacts of the ‘Dieselgate Scandal’ while achieving satisfactory outcomes under difficult conditions during the first quarter, reports BBC.

VW has posted sales revenue of £37.8 billion which is also 3.4% down from the same period of the previous year. However, the number of delivered vehicles has increased 0.8% to 2.5 million in the US while witnessing a 1.5% decline in the UK market.

Challenging economic condition in South America and Russia, fluctuations in exchange rate and expenses associated with recalling and fixing cars containing illegal software, all have contributed for the decrease in profit, according to a report published in Sky News. Plummeting Ruble and lower oil prices have forced VW to witness 35% fall in sales of Russia. Furthermore, a deep recession in Brazil has caused 17% decrease in sales.   

The VW earning report suggests for a cash reserve of almost €26 billion. The reserve is sufficient to tackle the cost of ‘Dieselgate Scandal’, predicts Frank Witter, Finance and Controlling Chief for VW. While disclosing the earning scenario, VW has confirmed its previously announced full year forecast, reports Deutsche Welle.

The Europe’s largest automaker has predicted for a 5% decline in sales. However, 5.5-6.5% increase in operating return on sales has absorbed the pressure originated from recorded 3.4% decrease on net sales.

Decreasing profit revealing earning report of VW has apparently irked the investors. Its shares have been traded at €130 per share during morning trade of May 31 at the Frankfurt Stock Exchange. The trading price is around 4.7% lower than the last trading session.