Volkswagen seeks to increase currency hedging ratios, says treasurer

By Nina Trentman

Volkswagen AG is looking to increase its currency risk protection with longer-dated derivatives, said Rolf Woller, head of the automaker’s treasury and investor relations departments.

“When it’s beneficial to us, we increase coverage quotas” going to 2026 or 2027, Woller said.

The Wolfsburg, Germany-based company uses currency hedging to reduce cash flow risk, he said. The euro’s recent weakness against the U.S. dollar isn’t entirely negative for Volkswagen, as the company pays for some goods in U.S. dollars and exports vehicles to the United States, Woller said.

Woller said he coordinates with the CFOs of the various Volkswagen brands and establishes coverage ratios based on those conversations.

“I need to plan volumes for my brands to be able to hedge that,” he said, adding that Volkswagen typically has a five-year plan for its currency hedging program.

Rising interest rates in the United States and elsewhere are partly benefiting the company as it earns higher interest on consumer loans in its financial services business, Woller said. Much of the company’s debt is related to this business and must be refinanced when due, he said.

Volkswagen had net debt of around 165 billion euros – or $164.06 billion – at the end of June, according to data provider S&P Global Market Intelligence, compared to 161.7 billion euros at the end of 2021.

The company has placed a US dollar bond as well as a green bond in recent months. Currently, around 47% of Volkswagen’s financing tools are made up of sustainable bonds or similar instruments, Woller said, adding that the company wanted to increase that figure to at least 50%.

“The number of sustainability investors is growing,” he said. “Ten years from now, you probably won’t find a simple vanilla bond that doesn’t have a sustainable element.”

Write to Nina Trentmann at [email protected]

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