Scandal costs grow but Volkswagen stock jumps

Causal factors, VW said, include demand seasonality, the improved vehicle market in Europe, as well as the “return of orders from large corporate fleets that we had forecasted”.

The German auto maker’s shares jumped more than 6% after it said first-half operating profit was EUR7.5 billion, boosted by an improvement at the Volkswagen brand between April and June.

In an unscheduled update ahead of interim results on July 28, VW said its first-half operating profit before one-off items rose 7 percent to 7.5 billion euros.

The company on Tuesday became the target of yet another round of lawsuits over the bogus software it has admitted to inserting into about 600,000 USA diesel vehicles – and 11 million worldwide – to cheat emissions standards.

Those figures excluded €2.2bn from further provisions linked to legal risks Stateside.

Including the one-off items, however, VW said its operating profit dropped 22 percent to 5.3 billion euros.

Volkswagen shares have soared after the German auto giant revealed its first-half earnings before charges related to its emissions scandal were “significantly higher” than market forecasts.

And it says it still expects 2016 sales revenue to fall by up to 5% compared to 2015.

Embattled German automaker Volkswagen said it will be able to post better-than-expected profits when it reports results next week, despite the costs and other problems associated with its diesel emissions scandal. VW is in the midst of a cost-cutting drive across the group aimed at making billions of euros of savings. The attorneys general of New York, Massachusetts and Maryland took action against the company, seeking civil penalties in light of VW officials “allegedly attempting to cover-up their behavior”.

It has already set aside €16.2bn to pay for technical fixes for cars that violate clean air standards, buybacks of vehicles and legal costs.

In June, VW agreed a record 14.7 billion dollar (£11 billion) settlement in America over its diesel emissions scandal which will see owners paid up to 10,000 U.S. dollars (£7,500) each in compensation.

Shares in VW jumped more than five percent at the Frankfurt Stock Exchange upon the news, helped also by Barclays’ analysts who gave the stock an “overweight” rating, saying in a note that VW was starting to move “in the right direction”.