Volkswagen shares up on results

Volkswagen’s first-half earnings exceeded market expectations, sending its shares up the most in three months, as its namesake car brand showed signs of recovering from the emissions-cheating scandal and started to benefit from cost cuts.

The shares rose 4% in Frankfurt, paring their losses to 7% this year. The company is valued at €64.5bn.

Operating profit before special items rose to €7.5bn in the first six months of 2016 from €6.99bn a year earlier.

The first-half figure excluded €2.2bn in additional provisions arising chiefly from legal risks in the US, increasing the total costs of the scandal to more than €18bn.

“The numbers show a historic record result in the second quarter, and that’s just spectacular considering the headwinds VW faces with declining revenues and all the woes triggered by the diesel scandal,” said Juergen Pieper, a Frankfurt-based analyst at Metzler Bank.

“Efficiency gains at the VW brand seem to be the key driver, and the speed at which this industrial behemoth is changing to achieve this is remarkable,” he added.

The earnings figures, which were released ahead of the full earnings report due on July 28, showed Volkswagen’s operations were recovering even as the company continues to wrestle with legal fallout from the scandal.

The attorneys general for New York, Maryland and Massachusetts announced lawsuits this week alleging that the cheating stretches back as far as 1999 and that “top brass” was aware, undercutting Volkswagen’s explanation that the deceit was the work of a small group of employees.

The state lawsuits were a blow after Europe’s largest automaker reached a crucial milestone last month by hammering out a $15.3bn (€13.8bn) settlement with US authorities.

Chief executive Matthias Mueller also presented a strategy for emerging from the crisis by pushing the development of electric car and self-driving features and investing into ride-sharing and other services.

Volkswagen, which has resisted calls from consumer groups and politicians to compensate about 8.5 million affected European customers, stuck to its full-year earnings targets.

The company is predicting that 2016 operating profit before special items will be between 5% and 6% of sales, with revenue down by as much as 5%. Including special items, first-half operating profit fell to €5.3bn from €6.82bn a year ago.