Assessment of the first quarter 2021
- Revenue €14.1 billion; operating profit €1.4 billion; operating return on sales 10.0 percent; profit before tax €1.7 billion
- Strong performance, partly due to one-off effects: net cash flow of €3.1 billion
- Q1 2021 dominated in particular by high demand, positive price and mix effects, and positive effects from the valuation of commodity hedges
- Audi is raising the pace of electric mobility: launch of the Audi e-tron GT and Audi Q4 e-tron model lines
Assessment Q1 – four questions to Jürgen Rittersberger
Mr. Rittersberger, you became CFO of Audi on April 1. What are your first impressions after five weeks?
Jürgen Rittersberger: Our company is going through an incredibly exciting yet challenging period. As a premium brand, Audi plays a key role in the Volkswagen Group and I’m therefore delighted to be part of this company as its CFO.
At the same time, this key role means that Audi bears great responsibility.
I believe the key to success is systematically leveraging synergies within the Group without losing sight of the typical product qualities associated with Audi. I want to help strengthen this unique competitive advantage.
In my first month, I’ve gained a very good insight into the company and got to know my team. I’m looking forward to tackling the challenges with my colleagues on the Board of Management and everyone at Audi.
How would you describe Audi’s performance in the first quarter of 2021?
Jürgen Rittersberger: The first quarter has provided further evidence of how resilient our company is. We managed to improve our key figures even though the supply of semiconductors was challenging and we were still battling with the impact of the coronavirus pandemic.
Deliveries to customers rose by 31 percent to 462,828 vehicles. China remains the main driving force and in this market the first quarter was the best in our history. We also registered strong growth in the USA, where we reported the most successful start ever to a year.
That is also reflected in our revenue, which rose 13 percent year-on-year to EUR 14.1 billion.
This improvement shows that our present product portfolio is well-positioned in all regions. We were able to increase deliveries, especially in the C and D segments and with electric vehicles. Deliveries of Audi e-tron models were 25 percent higher than in the first quarter of last year.
Audi is therefore continuing the strong performance seen in the fourth quarter of 2020. Our operating profit was EUR 1.4 billion in Q1/2021, giving an operating return on sales of 10 percent. Our performance was supported by positive valuation effects on commodity hedges and a strong price position.
In the first quarter of 2021, our net cash flow was EUR 3.1 billion. In addition to our strong operating profit and investment discipline, this was attributable to post-period cash inflows relating to the very strong fourth quarter of 2020.
Operating return on sales
Net cash flow
How is Audi dealing with the present crisis yet safeguarding its future success?
Jürgen Rittersberger: Our focus is still on securing and strengthening our financial base for the future. That is essential to drive forward our commitment to innovation and our transformation into a provider of connected and sustainable premium mobility. Our investment in future-oriented topics is therefore an important basis for this transformation.
“Above all, we are driving forward electric mobility and digitalization so that we can continue to deliver on our promise of “Vorsprung durch Technik” in the future.”
Above all, we are driving forward electric mobility and digitalization so that we can continue to deliver on our promise of “Vorsprung durch Technik” in the future. To allow the development of vehicles and technologies that differentiate us from our competitors, we have therefore raised the strategic corridor for research and development to 6-7 percent of revenue.
At the same time, we have restructured Technical Development to align it more stringently to platforms and software architectures. That improves our efficiency and facilitates the systematic leveraging of synergies within the Volkswagen Group, from which we at Audi benefit more than virtually any other premium manufacturer. At the same time, an Audi is still an Audi. A good example is the new fully electric Audi Q4 e-tron, which is based on the Group’s MEB platform.
In order to prioritize future-oriented projects, we are reducing costs – steadily but circumspectly. The main focus is on fixed costs.
Here, we benefit from the well-established Audi Transformation Plan and are making very good progress in implementing Audi.Zukunft.
What guidance can you give us on 2021?
Jürgen Rittersberger: 2021 will be another year defined by uncertainty. We are continuing to focus on countering the effects of the coronavirus pandemic and securing an adequate supply of semiconductors.
We assume that this will be visible in our key figures, especially in the second quarter. Despite the situation, deliveries to customers and revenue for the full year should be considerably higher than in 2020.
Our forecast for the other key performance indicators also remains unchanged: We still anticipate that the operating return on sales will be between 7 and 9 percent, bringing us closer to our strategic target corridor of 9 to 11 percent that we want to achieve in 2022. Our net cash flow should be between EUR 3.5 and 4.5 billion.
As Audi CFO, my priority for 2021 – and doubtless beyond that in many respects – is to improve product margins on both combustion models and electric vehicles. Another aspect that is important to me is that we work together on our fixed costs and optimizing our working capital.
Integrating ESG (environmental/social/governance) criteria into our decision-making processes is another important issue for me. I believe this is essential to ensure sustainable economic activity and give us a credible justification for our operations.
If we can take something positive away from the pandemic it’s the need to rethink our processes and bundle our resources more effectively so that we can take a focused approach to tomorrow’s issues.
At Audi, we’re convinced that this experience will help us in our transformation into a provider of sustainable and digital premium mobility.