Volkswagen is without doubt a global corporation. The company's twelve brands can be found on the roads around the globe. Volkswagen's operational presence is correspondingly international. 120 production sites are spread over four continents. On an average working day, almost 35,000 vehicles roll off the production lines. For the past two years or so, this complex network has been subjected to a real acid test: The Corona pandemic and the associated contact restrictions initially weighed on both production and sales. Later, the group had to contend with shortages of components, especially semiconductor chips. Just as the chip shortage was beginning to ease, the war in Ukraine upset the supply chains again. And now Covid-19 threatens to catch up with the group: The worst outbreak in two years in China forced Volkswagen to temporarily halt production in the city of Changchun.
In view of the situation outlined above, it is not surprising that the VW share is in reverse gear. Over a period of one year, it has lost a good fifth of its value. By comparison, the DAX® fell by only 4% in the same period. At least the selling pressure on the car stock has eased at the support zone in the area of EUR 130 (see chart). The large cap was helped by the latest figures from Volkswagen. Despite all the turmoil, the group doubled its operating profit in 2021 to EUR 19.3 bn. At the same time, the industry giant earned significantly more than in 2019, the fiscal period before the outbreak of the pandemic (see chart). "Over the past two years, we have learned to better manage the impact of crises on our business," CFO Arno Antlitz commented on the results. In addition to improvements in the product mix and cost savings, higher prices helped the group to jump in profits.
After the decline in sales last year, Wolfsburg wants to sell more vehicles again in 2022. Specifically, CEO Herbert Diess expects an increase in deliveries of 5% to 10%. With planned sales growth of 8% to 13%, he is targeting an operating return in the range of 7% to 8.5%. In 2021, this ratio was 7.7%. The top manager is thinking far beyond the current year in terms of the company's transformation. "Last July we presented the NEW AUTO strategy, with which we want to develop into a sustainable and software-driven mobility provider by 2030," Diess explained at the presentation of the financial statements. Technologically, he is fully committed to the MEB electric platform. Here Volkswagen has just expanded its cooperation with Ford. On the costly road to the electric future, Volkswagen could strengthen itself financially with an IPO of Porsche. Despite the current capital market turbulence, management is pushing ahead with the sports car maker's IPO. "We are convinced that a potential separate listing of Porsche AG is a logical next step and would create great value," explains CFO Arno Antlitz.
It is clear that the Volkswagen preference share is currently one of the most volatile shares in the DAX. This fact alone makes barrier reverse convertibles (BRCs) an interesting form of investment. The reason: implied volatility has a direct influence on the conditions of this yield-optimising structure. Leonteq has issued two BRCs on Volkswagen with a short maturity of 9 months. While the guaranteed coupon in the product currency CHF amounts to 14.12% p.a., it is 8 basis points higher for the EUR counterpart. The barrier is fixed at a low 55% of the initial price. Should the VW share fall to this threshold, the partial protection expires. The structured product would then be exposed to the full price risk of the underlying. Please note the soft callable function, which allows for early termination and redemption of this issue..
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