Return on investment (ROI) and value contribution in the reporting period

The operating result after tax of the Automotive Division, including the proportionate operating result of the Chinese joint ventures, was €11,438 (11,756) million in fiscal year 2018. Volume improvements were unable to compensate for the year-on-year decline that was primarily caused by rising depreciation and amortization charges due to the large volume of capital expenditure, higher research and development costs, as well as the fair value measurement of gains and losses on certain derivatives, which have been reported here since the beginning of the year. Effects on earnings and assets from purchase price allocation are not taken into account as they cannot be influenced operationally by management.

In the reporting year, the invested capital rose to €104,424 (97,021) million. The increase was particularly due to higher inventories as well as to additions to investments in property, plant and equipment and capitalized development costs.

The return on investment (ROI) is the return on invested capital for a particular period based on the operating result after tax. The ROI declined year-on-year as a result of the lower operating profit and higher invested capital. However, at 11.0 (12.1)%, it exceeded our minimum rate of return on invested capital of 9% in spite of the adverse effects of the special items on earnings.

At €6,474 (5,821) million, the opportunity cost of capital (invested capital multiplied by cost of capital) was up on the prior-year level due to the increase in the invested capital and the higher cost of capital. After deduction of the opportunity cost of invested capital, operating result after tax – which was negatively impacted by special items – led to a positive value contribution of €4,964 (5,935) million.

More information on value-based management is contained in our publication entitled “Financial Control System of the Volkswagen Group”, which can be downloaded from our Investor Relations website: www.volkswagenag.com.