The Volkswagen Group's business was heavily impacted by the Covid-19 pandemic in first nine months of 2020, but recovered noticeably in the third quarter. This means that the declines in deliveries, sales revenue and profit as of the end of September were significantly more moderate than at the half-year mark. The countermeasures initiated worldwide to cut costs, secure liquidity and decrease the funds tied up in working capital had as much of an impact as the continuing improvements in the situation in key sales markets. Deliveries to customers in the first nine months of 2020 fell by 18.7 percent year-on-year, to 6.5 (8.0) million vehicles. As a result, You may also like: Launch Diagnostic Tool. sales revenue, too, decreased by 16.7 percent to EUR 155.5 (186.6) billion. Thanks to a return to a clearly positive result in the third quarter, the operating result before special items amounted to EUR 2.4 (14. billion as of the end of September. The significant year-on-year decrease was primarily attributable to the decline in the sales volume due to the sharp fall in customer demand, especially in the second quarter. Other factors were negative effects of the fair value measurement of derivatives to which hedge accounting is not applied and exchange-rate effects. They were set against a non-cash gain on the contribution of Autonomous Intelligent Driving (AID) into the autonomous driving joint venture with Ford. Special items relating to diesel weighed on the operating profit with EUR –0.7 (–1.3) billion. Earnings before tax decreased to EUR 2.3 (14.6) billion, marking a clear return to positive territory.
Automotive Division: Net cash flow turns positive again, significant increase in net liquidity
Countermeasures initiated by the Volkswagen Group right at the onset of the Covid-19 pandemic to reduce costs, secure liquidity and decrease the funds tied up in working capital continued to have an impact. In particular, systematic inventory management made a considerable contribution to improving financial performance. Net cash flow in the Automotive Division stood at EUR 1.4 (8.6) billion after nine months, compared with EUR –4.8 billion at the end of June. This positive development also reflected the normalization of working capital in third quarter. In particular, there was a significant rise in liabilities recently, due to the demand-related expansion in production. The Automotive Division's net liquidity also climbed significantly compared with the end of June (EUR 18.7 billion), rising to a very solid EUR 24.8 billion. The dividend distribution of EUR 2.4 billion resolved by the Annual General Meeting on September 30 led to a cash outflow at the beginning of the fourth quarter. The successful issue of a hybrid bond had strengthened the capital base in the first half of the year. Research and development costs between January and September were down 4.7 percent year-on-year at EUR 10.2 (10.7) billion. However, the R&D ratio rose to 8.1 (6. percent due to the decline in sales revenue. Capital expenditure in the Automotive Division was significantly reduced by 21.6 percent to EUR 6.4 (8.2) billion. This allowed a slight reduction in the ratio of capex to sales revenue to 5.1 (5.2) percent, despite the pandemic-driven decrease in sales revenue. Throughout this process, investments in the big future topics, electrification and digitalization, were kept at a high level.
Frank Witter, member of the Group Board of Management responsible for Finance and IT, said: "The Volkswagen Group's business continued to be heavily impacted by the Covid-19 pandemic in first nine months. At the same time, the clear recovery trend in the third quarter shows how robustly our company is positioned. Not only did we get a grip on the acute effects of the pandemic and achieved a return to profitability. In this challenging situation, we also succeeded in making significant progress in implementing our strategy, for example by further expanding e-mobility and strengthening our digital competence, and in maintaining the financial leeway required for the substantial investments in the future. Depending on the future course of the pandemic, we are cautiously optimistic that ...

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