Volkswagen lowered its forecast for its current year’s profit margin on Friday, attributing its decline to raw material hedges at the conclusion of the third quarter.

Automobile manufacturers, like many other industrial companies, hedge against fluctuations in commodity prices, which may result in gains or losses in non-cash terms at the end of each quarter.

The largest automaker in Europe, Volkswagen, stated in a statement that it will not be able to recover its non-cash loss of 2.5 billion euros ($2.7 billion) by year’s end. The statement also included some preliminary third-quarter figures.

The business reported that it had reduced its previous projection of 7.5% to 8.5% to an operational profit before special items of 22.5 billion euros in 2023, which would be at the level of the previous year. This translates to a return on sales of 7.0% to 7.3%.

“But this may be better than some investors have feared and could spell an end to negative sentiment on the name for now,” Bernstein analysts wrote.

Volkswagen maintained its prediction for sales and deliveries, estimating that it will deliver between 9 and 9.5 million cars to customers this year, with sales expected to increase by 10% to 15%.

Following the announcement, Frankfurt-listed shares fell 2.5 percent, essentially staying the same from before.

The automaker reported that third-quarter sales increased 12% to 78.8 billion euros, while operating profit increased by almost 14% to 4.9 billion euros. The company is scheduled to announce full quarterly data on October 26.

Although the group reported that it profited from increased passenger car sales during the July–September period, it was negatively impacted by a supplier’s production difficulties following Slovenian flooding.

Following Volkswagen’s warning, Porsche SE, the company’s controlling shareholder, provided its 2023 prognosis. As a result, it now projects group profit after tax to be in the lower end of the predicted range of 4.5 billion to 6.5 billion euros.

(Adapted from Nasdaq.com)