EU AUTOMOTIVE: Volkswagen: Porsche Profit Warning
(VW; Baa1/BBB+/A-neg)
Clearly negative for Volkswagen and Porsche SE (HoldCo). Margins have been its achilles heel for some time before this latest blow. This could bring ratings pressure.
- Porsche OpCo, ~15% of Volkswagen EBITDA last year, will take charges related to moving back to more ICE and hybrid production.
- Adj. EBIT margin is now expected to be up to 2%, from 5-7% previous guidance.
- Net cash flow margin and revenue guidance confirmed.
- Still intends to pay a reduced dividend, but above its payout ratio policy.
- As a result, Volkswagen adj. EBIT margin guidance reduced from 200bp to 2-3%. Medium term target reduced to 10-15% from 15-17%.
- VW automotive net cash flow is now seen flat, from €1-3bn previously.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS/SUPPLY: Preview 20Y Bond Auction
Tsy futures drifting near session highs (TYU5 at 111-30.5, +6 vs. 111-31.5 high) ahead of the $16B 20Y bond auction (912810UN6) at 1300ET, WI is currently at 4.866%, 6.9bp rich to last month's stop. Today's results will be available shortly after the competitive auctions closes at 1300ET.
- July auction recap: Treasury futures consolidated slightly (TYU5 111-01.5 -111.5) after the $13B 20Y Bond auction (912810UL0) reopen traded through, drawing a high yield of 4.935% vs 4.950% When-Issued yield at the cutoff; 2.79x bid-to-cover vs. 2.68x prior.
- Peripheral stats: indirect take-up at 67.4% vs. 66.7% prior; direct bidder take-up 21.9% from 19.9% prior; primary dealer take-up of 10.72%.
US DATA: Firms’ Unit Cost Expectations Hold Recent Moderation – Atlanta Fed
The Atlanta Fed’s Business Inflation Expectations survey saw a second month having pared but not fully reversed tariff-driven increases whilst firms’ own-price expectations reversed a sizeable increase seen the previous quarter.
- 1Y ahead inflation expectations from the regular monthly survey, defined as the mean expected change in unit costs, were near unchanged in August at 2.26% after 2.29% in July. That’s after easing in the three previous months from a recent peak of 2.76% in April.
- It remains a little above the 2.04% seen in December or the 1.94% averaged in 2019.
- A separate quarterly question meanwhile saw mixed developments for firms’ own price expectations, with a firming in realized inflation over the past twelve months but softer expectations ahead.
- Specifically, realized own price inflation stood at 4.3% Y/Y after 3.9% in the May survey, its highest since Aug 2024, whilst expectations cooled from 5.0% (highest since Dec 2022) to 3.9% (lowest since Nov 2024 survey).
- Away from inflation expectations, the summary notes that “Sales levels and profit margins "compared to normal" increased”.
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Aug22 $1.1660-75(E1.1bln); Aug25 $1.1640-55(E2.2bln
- USD/JPY: Aug22 Y147.90($1.5bln)
- AUD/USD: Aug25 $0.6510-25(A$1.1bln)
