Germany’s Volkswagen shares tumble after margin downgrade

Oct 23 (Reuters) – Volkswagen (VOWG_p.DE) shares fell more than 3% to their lowest since April 2020 on Monday after the German carmaker cut its profit margin outlook for the current year, disappointing some investors.

Blaming negative effects from raw materials hedges, Europe’s largest automotive group on Friday indicated a return on sales of 7.0-7.3%, down from 7.5-8.5% forecast previously. Volkswagen kept its outlook for deliveries and sales.

Deutsche Bank said it expected consensus estimates to be reduced by “low-single digits” as a result, but added it viewed the steady guidance on deliveries as a sign of confidence.

“We note that the mark-to-market impact of derivatives obviously remains a downside and upside risk,” wrote Tim Rokossa, analyst at the German bank

“With volume and revenues holding up as expected, we see the warning to be company-specific rather than presenting a broad read-across to the sector,” he added in a note.

Volkswagen shares were 3% lower in Frankfurt by 0800 GMT, leading fallers across the European auto sector (.SXAP), which was down 1%.

Volkswagen said raw materials hedges led to a 2.5-billion euro ($2.65 billion) non-cash loss that it will be unable to offset by the end of the year.

It also said third-quarter sales grew 12% to 78.8 billion euros and operating profit rose 14% to 4.9 billion. The company is due to release full quarterly figures on Thursday.

($1 = 0.9439 euros)

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