Issue link: https://maltatoday.uberflip.com/i/685992
maltatoday, WEDNESDAY, 1 JUNE 2016 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way VW profi t slumps by 20% in wake of emissions scandal Volkswagen suffered a 20% profi t slump in the fi rst three months of 2016 as the German carmaker con- tinues to grapple with fallout from the diesel emissions scandal. Pre-tax profit fell to €3.2 billion in the first quarter, down from €3.97 billion in the same period a year ago. VW chief executive Matthias Mueller said he was "satisfied" with the start of "what will undoubtedly be a demanding" 2016. The company admitted last year that it installed software to cheat US emissions tests. It has already set aside more than €16 billion to pay for costs arising from the scandal. Analysts at the bank NordLB expect the total to rise to between €20 billion and €30 billion. The German giant has agreed a deal with the US Department of Justice in which it will buy back and "substantially" compensate more than 500,000 American owners of its diesel cars affected by the emissions cheating. Final details are expected in June. "In the first quarter, we once again managed to limit the economic effects of the diesel issue and achieve respectable results under difficult conditions," Mueller added. Group sales revenue fell 3.4% to €51 billion in the period. Sales of VW-branded cars were particularly hard hit, with profit from that part of the business falling 83% to €73 million from €514 million last year. The company maintained its forecast of a 5% fall in 2016 sales revenue compared with last year, "depending on economic conditions - particularly in South America and Russia - and exchange rate developments as well as against the backdrop of the diesel issue". However, it predicted "a marked decrease in sales revenue" in 2016 for its passenger car brands, which include Audi, Seat and Skoda. "2016 will be a transitional year for Volkswagen... we remain confident that our operating business will again record solid growth this year," Mueller added. VW shares fell 3% in Frankfurt to €133.57 and are down 40% over the past 12 months. Ana Nicholls, automotive analyst at the Economist Intelligence Unit, said: "Unit sales continue to rise, up 0.8% in the first quarter of 2016, suggesting that customers care less about the emissions scandal than investors and the media do. "Ironically that means Volkswagen is now on track to become the world's biggest vehicle- maker this year, given that Toyota and General Motors have both seen tables fall back so far." Market Commentary: A quiet start to the week European stock markets oscillated only slightly during Monday's session, as the week kicked off with a holiday in both the US and the UK. The session was short- ened thanks to Memorial Day in America and a bank holiday in England, which meant that trading volumes were significantly lower than usual. Nevertheless, investors in Europe were getting the first chance to react to Federal Reserve Chairwoman, Janet Yellen's strong indications that the US central bank would "probably" raise interest rates in the "coming months". While higher US interest rates could sap global liquidity, Wall Street and European investors took Yellen's comments in their stride, suggesting that the world's largest economy was strong enough to weather another rate hike, following that in December. This news did not do much for gold though, as the precious metal fell below $1,200 for the first time since mid-February, with Mrs Yellen's comments sending the dollar surging to two-month highs. An increase in US rates would raise the opportunity cost of holding gold, which does not earn interest. It would also strengthen the dollar, making gold more expensive for other currency holders. German stocks climbed to a one-month high on Monday as investors bet the euro's weakness against the US dollar would help German exports. Germany's DAX 30 spent the day in the green, gaining 0.46%. Among the heavyweights, Daimler's shares rose 1.8%, dragging other auto makers up with it. Fiat Chrysler traded 2.73% higher, as did Volkswagen, which enjoyed a 1.1% gain on Monday. Also trading higher was German airline Lufthansa after the company said it would suspend flights to Venezuela next month due to the country's economic problems. Other movers during the day were shares in PostNL. The Belgian mail, parcel and e-commerce corporation announced that it attempted a merge with fellow Belgian mail operator BPost. However, talks fell on deaf ears, and no deal was concluded. BPost shares ended the day 2.43% lower. In the technology sector, it was a rather rare sight for shares of Twitter to be up 5.24% to trade at $15.05. Meanwhile, Crude oil prices remained little changed, as investors waited for cues from the Organisation of Petroleum Exporting Countries (OPEC) meeting due on Thursday, where the issue of oversupply is expected to take centre stage. Despite the low trading volumes, crude oil enjoyed a 0.3% rise on Monday, and is creeping back near $50 a barrel. Oil prices fall ahead of OPEC meeting Brent crude prices fell on Tues- day ahead of an OPEC meeting on Thursday, while US crude edged higher as the summer driving sea- son began. Brent crude oil futures LCOc1 were down 26 cents at $49.50 a barrel by 1056 GMT (6.56 a.m. ET), while U.S. West Texas Intermediate (WTI) crude oil futures CLc1 traded 9 cents higher at $49.42 a barrel. Supply in the Middle East is on the rise as Iraq will supply five million barrels of extra crude to its international oil company partners in June. Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries, had already been targeting record crude export volumes from southern terminals next month of 3.47 million barrels per day. Asian imports of Iranian oil rose more than 13 percent in April from a year before as Tehran vies to recoup market share lost under international sanctions. OPEC's 13 members will meet in Vienna to set the group's policy, which is expected to focus more on market share than on influencing prices. "Anyone betting on a surprise outcome in Thursday's meeting is brave in doing so," Vienna- based JBC Energy said in a note on Tuesday. JBC said that with oil prices trading near $50 a barrel and improving market sentiment on unplanned outages and expectations of draws on crude inventories in the second half of the year, OPEC is under less pressure to act. "But of course, as with any base case assumption and with a new Saudi oil minister in town, there are alternative scenarios imaginable," JBC said. Meanwhile, OPEC is expected to choose Nigeria's Mohammed Barkindo, a former head of state oil firm NNPC, as the next secretary-general of the producer group. OPEC has been looking for a replacement for Libya's Abdullah al-Badri, who was elected acting secretary-general in December until the end of July after serving full terms. Barkindo led the Nigerian National Petroleum Corporation from 2009 to 2010. The consensus of all members - which in the past has sometimes been elusive - is required for the appointment of a new secretary- general. Brent crude prices fell on Tuesday on rising output from the Middle East