KUALA LUMPUR, July 29 (Bernama) -- Bursa Malaysia rebounded to close higher on Wednesday on selective buying of defensive stocks after a volatile trading session. IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said consumer products and services stocks lifted the key index higher, overcoming lingering geopolitical concerns. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.08 points to 1,715.56 from yesterday’s close of 1,712.48. The benchmark index, which opened 1.91 points higher at 1,714.39, moved between 1,710.79 and 1,720.59 during the day’s trading. In the broader market, gainers outstripped decliners 550 to 476, while 612 counters were unchanged, 1,129 untraded, and 48 suspended. Turnover rose to 2.96 billion units valued at RM2.48 billion from 2.94 billion units valued at RM2.56 billion on Tuesday.
Volkswagen announced plans to intensify cost-cutting measures in the second half of the year and beyond to improve its profit margins. The German automaker reported first-half margins it deemed "too low" and is taking steps to address this issue.
Key Points:
Cost-Cutting Measures:
- Volkswagen will need to make "significant cost-cutting efforts" to revive its profit margins.
- The company is reducing production capacity, cutting costs, and adjusting software spending, partly due to its investment in electric vehicle maker Rivian.
- Factory capacity has already been cut by 25% at certain locations, including the main plant in Wolfsburg, as part of a broader goal to reduce capacity by 10% across Europe.
- Restructuring measures, such as incentivizing early retirement, will take time to show effects.
Financial Performance:
- Volkswagen is in the midst of a €10 billion (US$10.83 billion or RM49.5 billion) savings drive announced in December, with €4 billion in cuts expected in 2024.
- Shares fell 2% in morning trade after a reduction in the 2024 margin guidance in July to 6.5-7% from 7-7.5%.
- The company reported second-quarter earnings before interest and taxes of €5.46 billion, down from €5.6 billion a year earlier.
- The operating margin at its core VW brand fell to 5% due to restructuring costs, while premium brand Audi's returns were affected by supply chain bottlenecks.
Strategic Focus:
- Volkswagen is revamping its global lineup with bespoke electric vehicle (EV) models, particularly targeting the Chinese and US markets to defend market share in China, maintain its share in Europe, and grow in the US.
- The company is investing up to US$5 billion in Rivian as part of a venture to share EV platforms and software.
- The joint venture with Rivian will impact investment in Volkswagen's software unit Cariad, which has faced delays and losses since its inception.
Executive Comments:
- Chief Financial Officer Arno Antlitz emphasized the need for significant cost-cutting efforts to achieve financial goals, stating that a 6.3% return after six months is too low.
- CEO Oliver Blume stressed the focus on "costs, costs, and costs" as a priority.
- Blume also mentioned that investment in the Cariad unit would decrease due to the joint venture with Rivian, which will develop the next-generation software platform.
Outlook:
Volkswagen is navigating a challenging environment with efforts to cut costs and revamp its product lineup to remain competitive in the rapidly evolving automotive industry. The company's strategic investments and restructuring initiatives aim to improve margins and position it for future growth in the global EV market.
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