Volkswagen Group cut its dividend after losing 2.4 billion euros ($2.8 billion) in the second quarter, when the COVID-19 pandemic shuttered showrooms and factories in key markets.
Revenue slumped by more than a third to 41.1 billion euros ($48.3 billion) in the three months through June, roughly in line with analyst estimates compiled by Bloomberg. The second-quarter loss compared with a profit of 5.13 billion euros ($6 billion) a year earlier.
The German manufacturer lowered its proposed 2019 payout by a quarter to help save roughly $1 billion after global deliveries contracted in the six months through June. VW expects markets to recover in the second half after business in July improved from the previous month.
The company posted an adjusted operating loss of 1.7 billion euros ($2 billion) in the second quarter, down from a 5.1 billion euro adjusted operating profit in the year-earlier period.
The company said its 2020 operating profit, before and including special items, would be severely down on the year before, albeit in positive territory. VW predicted a significant decline in full-year sales, though it said it was seeing a gradual recovery globally as lockdowns eased.
The results show the dramatic impact of the industry’s biggest slump since World War II. Europe’s largest automaker cut its full-year outlook in April, echoing peers and parts suppliers that trimmed expectations after the pandemic spilled from China to Europe and North America. While profits largely tanked during the health crisis, including a record $8.6 billion loss at Renault, rivals including Daimler, General Motors, and PSA Group managed to weather the downturn better than feared.
“The first half of 2020 was one of the most challenging in the history of our company due to the COVID-19 pandemic,” VW Chief Financial Officer Frank Witter said. VW’s shares fell the most in seven weeks.
Restoring operations to pre-crisis levels is critical for Volkswagen after it rolled out a fresh iteration of the important Golf hatchback and plans to start delivering the all-electric sibling ID3 to customers in September. Success of the ID.3 is vital to comply with stricter emission rules in Europe and catch up with Tesla Inc, which in recent weeks zoomed past traditional manufacturers to become the world’s most valuable automaker.
The dividend cut is designed to conserve cash after VW burned through more than 2 billion euros ($2.3 billion) in the second quarter, the period worst hit by the pandemic.
On top of the broader market turmoil, the fallout from the diesel scandal continues to haunt the company five years in. Witter said he expects cash outflow related to the engine rigging to rise to 2 billion euros ($2.3 billion) in the second half of the year, from 1.6 billion euros in the first half.
The Porsche brand proved relatively resilient in the first half, recording an operating profit thanks to deliveries that declined just 15 percent.
Audi swung to an operating loss after sales plummeted. The premium-car division embarked on a deep restructuring last year to revive squeezed margins at what used to be the group’s biggest profit contributor. New chief Markus Duesmann this month pledged to seize the virus-related slump to make the carmaker more nimble.
While Volkswagen aims to more than double its market capitalization to 200 billion euros ($235 billion), it’s currently worth less than 70 billion euros after its shares fell by about a quarter since the beginning of the year.
The company is determined to lift its value by reducing complexity and consistently meeting financial targets, Witter told reporters during a call. While the sale of industrial gearbox maker Renk AG should be completed by year-end, VW abandoned considerations to divest the MAN Energy Solutions machinery business and will restructure the unit instead, he said.
VW’s takeover offer for U.S. truck maker Navistar International Corp. “is on the table,” but mot much has happened in recent weeks because of the pandemic, Witter said.
Reuters contributed to this report.