Carmakers like Volkswagen are scrambling to find alternative sources of vital parts made in Ukraine elsewhere.JENS SCHLUETER/AFP/Getty Images
Volkswagen AG, Europe’s top carmaker, doubled its operating profit in 2021 but warned that Russia’s invasion of Ukraine and its impact on supply chains could hit business this year in unforeseen ways.
Carmakers are scrambling to find alternative sources of vital parts made in Ukraine, including wire harnesses, from as far afield as China and Mexico, as Russia’s invasion halts assembly lines and breaks complex supply chains.
“The conflict ... has an impact on the entire global economy, on raw materials, on supply chains and therefore on our company,” Volkswagen finance chief Arno Antlitz told journalists on Friday after publishing preliminary 2021 results.
“The impact of this cannot be conclusively assessed at this point in time,” he said, adding the group was currently working on tapping other suppliers in Eastern Europe and North Africa to obtain wire harnesses.
Volkswagen said there was a risk that the latest developments in the war in Ukraine will have a negative impact on its business. Russia calls its actions in Ukraine a “special operation.”
The company still proposed to raise its annual dividend by more than half to 7.50 euros per ordinary share and 7.56 euros per preferred share for 2021, after operating profit doubled to 19.3 billion euros ($21.1 billion) last year.
The doubling of operating profit in 2021 was thanks to higher prices and a more favorable product mix, Volkswagen said, adding it expects an operating margin on sales of 7.0%-8.5% in 2022, compared with 7.7% in 2021.
Sales are forecast to rise 8%-13% in 2022, compared with a 12.3% increase to 250 billion euros in 2021.
“However, this guidance is subject to the further development of the war in Ukraine and in particular the impact on the group’s supply chains and the global economy as a whole,” the company said.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.