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VOL. 40 | NO. 44 | Friday, October 28, 2016

Volkswagen raises earnings outlook as it returns to profit

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FRANKFURT, Germany (AP) — Volkswagen raised its sales and earnings outlook Thursday after bouncing back to a profit of 2.34 billion euros ($2.55 billion) in the third quarter from a large loss a year earlier, when it took a big charge from its car emissions scandal.

The after-tax profit reported Thursday compared with a loss of 1.67 billion euros in the same period a year ago.

At the time, the German company took a 6.7 billion euro charge in anticipation of looming costs for recalls, fixes and buybacks of diesel cars that it had fitted with software that enabled them to cheat on emission tests.

A judge in federal court in San Francisco on Tuesday approved a $15 billion settlement under which Volkswagen will buy back or fix almost half a million cars.

Third quarter sales revenue rose 1 percent to 52.0 billion euros. Global vehicle sales for the company's brands, which include Audi, Porsche SEAT, Skoda and Lamborghini, rose 4.4 percent.

Most of the company's 8.6 billion euros in operating profits for the first nine months of the year came from luxury brands Porsche, with 2.9 billion euros, and Audi, with 3.9 billion. The flagship Volkswagen brand, which sells cars in the less-profitable mass market range, lagged with 1.2 billion euros, in part due to higher marketing costs as a consequence of the emissions issue.

The company raised its outlook, saying this year's sales revenue would match last year's, instead of the 5 percent drop expected in the earlier forecast. It said that operating earnings as a percentage of sales would be at the upper end of its previous outlook range of 5 percent to 6 percent.

The Wolfsburg-based company's cash cushion — which would help it pay current and further settlements — rose to 31.1 billion euros at the end of September, up from 28.8 billion euros at the end of the previous quarter.

Chief Financial Officer Frank Witter said on a conference call with analysts that the company was determined to maintain a net liquidity, or cash, figure of over 20 billion euros. That would help ensure it has enough cash to pay for vehicle buybacks stemming from the diesel scandal, and to underline the company's creditworthiness to ratings agencies. He called the quarter's figure "certainly a very healthy number."

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