Research, Charts & Company Announcements
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VW has priced its bond issues
30 Mar 17
The company has issued four bonds with terms of up to ten years. It has issued a total of €8bn with €1.5bn each and terms of four and six years and a €2.5bn bond with a term of two years. The 10-year, €2.5bn benchmark bond carries a coupon of 1.875% and was issued at 98.9%, i.e. its yield is just below 2%. As the risk-free rate is currently in the vicinity of 0.6% the company debt spread is 140bp, which we had included in our DCF model. Finally, another €2.5bn with a term of two years was issued.
Deliveries down in both the month of February and ytd
20 Mar 17
The group’s car, van and truck deliveries fell by 0.9% to 686,900 in the last month and by 2.6% to 1.50m ytd. Particularly weak was the German market (-7.6% to 97,400 and -3.3% to 188,600, respectively) as well as APAC (-2.2% to 248,400 and -9.5% to 616,500). In addition, Brazil continues to be in a dismal state (-8.9% to 19,700 and -14% to 39,000). On the other hand, after a poor performance earlier last year, deliveries increased in the USA (+13% to 42,800 and +14% to 84,300). Western Europe (outside of Germany) also saw a fall of 1.6% to 154,300, but, thanks to January being a good month, the ytd number is up by 3.3% to 326,000. The VW (-2.6% to 384,100 and -3.9% to 880,000) and Audi brands (-1.1% to 125,100 and -7.7% to 249,100) were the group’s weak spots so far this year. Simultaneously, the SEAT brand did well (+11% to 31,800 and +14% to 64,000) and the two truck divisions (i.e. Scania and MAN) saw their deliveries rising by about 8% in February and by an average of some 3% ytd.
A glance reveals: net debt and provisions were sharply up in 2016
14 Mar 17
VW has released its final 2016 accounts. These show a €8.3bn increase in net debt (to €126bn) and a €11.7bn provision increase (to €90bn). These two numbers combined now represent 253% of shareholders’ funds compared to 243% at the end of 2015. Net debt has increased as cash from operations (based on management’s definition) fell by more than €4bn to €9.4bn while total investment spend fell by only €0.5bn to €20.7bn. Based on this definition, WCR consumed more than €16bn of cash in 2016 compared to €2.3bn in 2015. This number includes the increase in provisions, which was +€18.3bn in 2015 and +€6.0bn in the last year.
16.6% stake in Navistar costs €242m
02 Mar 17
VW conquers the Nafta truck market with an investment in this ailing heavy truck, school bus and defence vehicle producer. Total volume was a good 50,000 trucks and buses for the US and Canadian markets in the October 2016 FY. Market share was in the vicinity of 15%.
Basic salaries for the Board to be raised by 30%
26 Feb 17
All Management Board members have agreed to a new compensation scheme. On one hand, the CEO’s maximum annual compensation is limited to €10m and that of the other Board members to €5.5m. This is, compared to what previous CEO Martin Winterkorn received, a considerable cut. However, the fixed basic salaries have been raised by 30% to €2.125m for the CEO and to €1.35m for the other members. This increase is at odds with what management is willing to grant the company’s employees. We wonder how the Supervisory Board (which includes influential employee representatives and the Prime Minister of Lower Saxony) has come to this decision. It continues to show that management has not received the message.
Higher than expected profits, but a lower dividend
26 Feb 17
VW released preliminary 2016 numbers that show higher than expected deliveries, revenue, and earnings, although Q4 profits were again negative. This is the result of €7.5bn of so-called special items (i.e. costs associated with Dieselgate in the USA) whereas this number was €2bn in 9M 16 and €16.9bn in 2015. The group increased deliveries by 3.8% to 10.4m and revenue by 1.9% to €217bn. As special items fell by 56% or €9.4bn to €7.52bn, operating earnings recovered from a loss of €4bn to a profit of €7.1bn. However, there is no number for earnings from at-equity consolidation available yet. As the pre-tax number was up by ‘only’ €8.6bn to +€7.3bn, either this profit contribution was down or net financial expenses were up. Except for the dividend (we had expected €2.26), all other numbers are slightly higher than our projections.
24 Mar 17
We note the share transaction yesterday, and think the stock will benefit from the increased liquidity. We continue to believe there is good valuation upside to the shares. However, we are terminating coverage of Watkins Jones from this morning and withdrawing our forecasts from the market.
Outperformance in the bag
24 Mar 17
IG Design has had a very good second half trading and has issued a year-end update indicating that numbers will exceed market estimates. We have lifted our FY17 and FY18 numbers by 8-10% at the pre-tax and EPS levels, following an 11% uplift to earnings with the interims. Particularly notable is the comment on strong cash flow, with the group reaching its target of average leverage less than 2.5x EBITDA two years ahead of plan. With the earnings and cash flow momentum, strong balance sheet and progressive dividend, there is good potential for further share price upside.
N+1 Singer - Morning Song 28-03-2017
28 Mar 17
A G Barr (BAG LN) Share buybacks the main news around FY17 finals | Churchill China (CHH LN) An excellent set of 2016 results and more upgrades | Ergomed (ERGO LN) FY results show strong Services growth; Phase III Zoptrex® data ahead | Instem (INS LN) Investment to accelerate growth trajectory | Severfield (SFR LN) Strong H2 drives upgrades; CEO temporarily steps down due to ill health | Summit Therapeutics (SUMM LN) Strengthening the data package: planned extension of PhaseOut DMD | T. Clarke (CTO LN) Strong conclusion to FY16, record order book
Share & share alike
29 Mar 17
In a key week in a number of respects, some of the optimism that buoyed up markets has dissipated. In the UK, inflation istrending higher and above wage growth, putting pressure on the consumer although retail sales show contrasting signs. Corporate action continues apace. Yesterday there were more than fifty company results – all appear to be at least as expected. We now face a prolonged period of pre-Brexit bargaining. In Share News & Views we have covered Cropper (James)*, ECSC*, Gamma Communications, Goodwin*, Helios*, Manx Telecom, Personal Group and Quarto Group.-