Volkswagen management seems confident on hitting their new 2023 target. They are guiding for a robust Q4. However, they didn’t give much details on 2024 other than that product cost will improve. It also seems that logistics environment will continue being challenging, putting pressure on cash flows.Here are some of the main insights from the earnings call;
- Financial Services Division contract volume was stable, credit loss ratio was unchanged from prior year, and operating income declined 28% y/y to 3 billion euros in the 9 months due to normalization of used cars, significant increase in interest rates, and adverse exchange rate trends.
- Financial impact from the Slovenia flood that affected 100,000 units in Q3 and 50,000 units in October is in mid-triple-digit million burden, and is priced into the full-year guidance.
- Product cost that is expected to be a slight headwind in Q4 compared to Q3, is guided to decline by more than 1 billion euros in Q4 partly due to y/y effect, and contracts in place for purchase of cobalt &nickel at a cheaper price.
- Cashflow is expected to improve in Q4 partly due to strong expected sales, room for inventory
improvement towards year-end, and y/y effect. - Q3 (usually a weaker quarter) achieved a margin of 6.2%, 1% lower than seasonall average, half due to flooding and half due to material costs (product& logistics costs).
Full summary of earnings call (Mindmap)