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VW ditches outlook after COVID-19 hammers first-quarter profit

FRANKFURT (Reuters) – Germany’s Volkswagen Group <VOWG_p.DE> withdrew its outlook for 2020 on Thursday due to uncertainty related to the new coronavirus outbreak which caused operating profit to drop 81% in the first quarter.

The carmaker, like others in the sector, halted production at some sites last month as governments around the world imposed lockdowns on their populations to stem the spread of the virus.

The measures to contain the movement of people have impacted car sales and profit in the first quarter, the carmaker said.

Operating profit fell to 0.9 billion euros ($979.7 million), which would be an 81% drop from 4.84 billion last year, and the group’s return on sales margin is expected to be around 1.6%, down from 8.1% in the first quarter of 2019.

The full year outlook “can no longer be achieved”, Volkswagen said. In February Volkswagen had said it aimed to achieve customer deliveries in line with the previous year, revenue growth of 4% in 2020 and slightly higher passenger car deliveries.

In its passenger cars unit, Volkswagen Group had predicted an operating return on sales between 6.5%-7.5% in 2020 and an operating return on sales of 4%-5% in its commercial vehicles unit.

Porsche Automobil Holding SE, the family-controlled holding company which owns a majority stake in Volkswagen Group, also withdrew its forecast for 2020 due to the earnings situation at Volkswagen Group.

VW said negative fair value impacts from commodity derivatives and currency effects hit the first quarter 2020 result by 1.3 billion euros.

The company now expects first quarter revenue of 55 billion euros, down 8% from 60.01 billion euros in the year-earlier period.

Its automotive business had a negative cash flow of 2.5 billion euros, due to higher inventories and a reduction in its liabilities, VW said.

VW’s luxury arm Audi said measures to contain the coronavirus pandemic had led retail sales to come to a near standstill. Sales revenue in the first quarter was 12.5 billion euros, down from 13.8 billion euros in the year-earlier period.

Volkswagen Group, which owns Audi, Bentley, Bugatti, Skoda and Porsche, is due to publish full first quarter results on April 29, 2020.

(Reporting by Tom Sims and Edward Taylor; Editing by Michelle Martin and Emelia Sithole-Matarise)