Volkswagen’s profit falls as restructuring, costs weigh on first half

(Reuters) – Volkswagen on Thursday reported a 2.4% drop in its second quarter operating profit as Europe’s top automaker continues to cut costs and revamp its model range. Earnings before interest and taxes (EBIT) came in at 5.46 billion euros ($5.91 billion) in the April-June period, with an operating return on sales of 6.6%, in line with LSEG’s mean estimates. The group lowered its operating returns outlook in July to the 6.5-7.0% range because of higher expenses due to the possible closure of an Audi plant and a 3.8% drop in second quarter sales.

“We will have to make significant cost-cutting efforts in the second half of the year and beyond in order to achieve our goals,” Chief Financial Officer Arno Antlitz said in a statement, describing operating returns over the first half of the year as “too low.”

Antlitz had said in April that he expected rising orders to have a positive impact on second quarter results, after the carmaker reported a 20% drop in profits in the first three months of the year.

Order books were filled into the fourth quarter, Volkswagen said on Thursday, but the carmaker’s finances were dragged down by factors including rising provisions for an ongoing severance programme and higher fixed costs.

($1 = 0.9236 euros)

(Reporting by Andrey Sychev and Victoria Waldersee, Editing by Miranda Murray)