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Volkswagen : Truck & Bus Sees Profit Boost From Stronger Europe Sales

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03/20/2017 | 03:51pm CEST

By William Boston

MUNICH--Volkswagen AG's truck and bus division expects a boost in profit this year on the back of stronger sales in Europe and China as well as a slight recovery in Brazil, company officials said Monday.

The company also unveiled plans to offer a service for its customers and other partners which can digitally connect vehicles.

Volkswagen Truck & Bus just ended its first year as a standalone company, grouping Volkswagen's utility vehicles operations and truck makers Scania and MAN. In its first year, the truck division generated 1.3 billion euros ($1.39 billion) in pretax profit, an increase of 27% from the previous year. Revenue rose 4% to EUR21.3 billion from sales of around 184,000 vehicles.

Chief Executive Andreas Renschler said he expected a "significant increase" in earnings this year, after generating a return on sales of about 6.1% last year, but declined to provide a specific profit and sales outlook. Long-term, the division is targeting a pretax return on sales of around 9%.

The upbeat outlook depends on improvement in Brazil, he said, which has suffered steep declines over the past few years.

"Brazil has been an important market for us for decades," he told reporters in Munich. "We expect a slight recovery in Brazil in the second half of the year and a stronger rebound in 2018."

Volkswagen's truck business plans to invest about EUR420 million in Brazil over the next five years, Chief Finance Officer Matthias Gruendler said.

Last year, Volkswagen's truck division took a strategic stake in the U.S. truck maker Navistar International Corp. Mr. Renschler said the cooperation with Navistar was on track, but gave no new update on the developments.

Over the next few months, the company plans to roll out a new cloud-based service that will connect the company's trucks and be open for its customers and other partners. The service, called RIO, is already being tested with a fleet of 60 vehicles and goes live sometime between May and August. It will connect trucks remotely with their owners and customers while providing data for predictive analytics for use in maintenance planning and repairs. It will also allow VW to offer new digital services to its truck customers.

"We want to create an eco-system for trucks," Mr. Renschler said.

Write to William Boston at william.boston@wsj.com

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Financials (€)
Sales 2017 226 532 M
EBIT 2017 16 318 M
Net income 2017 11 897 M
Debt 2017 15 817 M
Yield 2017 2,62%
P/E ratio 2017 5,70
P/E ratio 2018 5,38
EV / Sales 2017 0,37x
EV / Sales 2018 0,35x
Capitalization 68 001 M
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Mean consensus OUTPERFORM
Number of Analysts 32
Average target price 166 €
Spread / Average Target 25%
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Matthias Müller Chief Executive Officer
Hans Dieter Pötsch Chairman-Supervisory Board
Martin Hofmann Head-Group Information Technology
Peter Mosch Member-Supervisory Board
Bernd Osterloh Member-Supervisory Board
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