FRANKFURT -- Volkswagen Group said its second-quarter operating profit rose 30 percent despite lower vehicle sales, helped by VW brand's higher-margin utility vehicles and rising volumes at Porsche and Skoda.
Operating profit rose to 5.13 billion euros ($5.71 billion), up from 3.94 billion ($4.4 billion) in the second quarter last year, the automaker said in a statement on Thursday. Vehicle sales fell 1.8 percent.
The operating profit jump was magnified by the absence of a diesel charge that VW booked in the year-earlier period.
VW has been so far more resilient to industry turmoil that has hit automakers and their suppliers. Both BMW and Daimler scaled down their outlook this year as softening sales compounded a squeeze on profits from record spending to develop electric and self-driving cars.
The 12-brand group, whose nameplates include Porsche, Audi and Bentley, is getting a boost from sharing components across nameplates. Its MQB architecture saves costs across its vast lineup of small and mid-size vehicles, Credit Suisse said in a note this week.
Models such as the VW T-Roc crossover and Skoda Karoq account for some 35 percent of deliveries this year compared with 25 percent last year, a turnaround after VW lagged rivals’ SUV lineups for years.
VW reiterated it expects vehicle deliveries in 2019 to exceed a prior-year figure and for revenues in the passenger cars and commercial vehicles divisions to grow at least 5 percent.
Models such as the VW T-Roc crossover and Skoda Karoq account for some 35 percent of deliveries this year compared with 25 percent last year, a turnaround after VW lagged rivals’ utility vehicle lineups for years.
The automaker said it continues to expect an operating return on sales in the passenger cars area between 6.5 percent and 7.5 percent. VW reiterated that, after special items, it expects the operating return on sales to be at the lower end of the expected range for the group and the passenger cars business area.
VW expects the proportion of utility vehicle sales to rise to 40 percent by 2020.
"Our model mix is improving and we’ve been successful with our pricing," CFO Frank Witter told Bloomberg TV in an interview.
The second half will be "potentially difficult" in a “weaker market environment,” he said.
VW remains on track to generate at least 9 billion euros ($10.1 billion) in cash this year after first-half results offer "a stable basis," Witter said.
To counter declining demand, VW has scaled down production plans by some 450,000 vehicles for this year and will lower output further if necessary, Witter said.
VW’s cut roughly equals the annual output of one its 122 factories worldwide.
"VW may see fresh records on sales, revenue and operating results this year,” NordLB analyst Frank Schwope said in a note. “However, worsening trade conflicts and ongoing high investments in future technology for electric and self-driving cars will make for a volatile environment."
Evercore ISI analyst Arndt Ellinghorst said free cash flow of 6.9 billion euros ($7.7 billion) in the first half is "almost double of what Daimler and BMW together will generate in all of 2019."
VW last month listed its heavy trucks business Traton, a significant move toward its goal of greater focus on the main car business. Investors expect an update on the next steps to streamline VW’s conglomerate structure, which might include selling industrial machinery units Renk and MAN Energy Solutions.
Witter said VW’s management is "pushing hard" to lift the automaker's low valuation, with the company exploring strategic options for Renk and MAN Energy Solutions.
Analysts have urged VW to consider deeper changes including an initial public offering of the high-margin Porsche sports-car business to unlock value.
A Porsche IPO "isn’t a priority" and there are currently no plans to sell the Ducati motorbike brand, Witter said, reiterating previous comments. But he left the door open to explore options at some point "down the road."
First-half results: Bentley swings to profit, Audi falls
In the first half, VW Group's operating return on sales rose to 7.2 percent, up from 6.8 percent in the year-earlier period. By contrast rival PSA Group on Wednesday said it had delivered an operating margin of 8.7 percent in the first half.