VW profit tumbles 20% in the wake of the scandal emissions

Volkswagen profit has plummeted 20% in the first three months of 2016 as it continues to grapple with the impact of diesel emissions scandal.

Profit before tax fell to € 3.2bn (£ 2.4bn) in the first quarter, down from € 3.97bn in the same period last year.

Chief executive Matthias Mueller said he was "satisfied" with the start of "what will no doubt be demanding" 2016.

VW admitted last year that installed the software to trick US emissions test.

It has set aside more than € 16bn to pay the costs arising from the scandal. Analysts at the bank NordLB expect the total to increase to between € 20 billion and € 30 billion.

The German giants have agreed a deal with the US Justice Department in which it will buy back and a "substantial" compensation more than 500,000 American owners of diesel cars are affected by fraud emissions. The final details are expected in June.

"In the first quarter, we once again managed to limit the economic impact of the issue of diesel and achieve a respectable result in difficult conditions," added Mr. Mueller.

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Group sales revenue fell 3.4% to € 51bn in the period.

Sales of VW-brand cars are very hard hit, with the advantage of part of the business fell 83% to € 73m from € 514m last year.

the company maintained its forecast of a 5% decline in sales revenue in 2016 compared with last year, "depending on economic conditions - particularly in South America and Russia - and the exchange rate as well as the background of the problem of diesel".

However, predicted "a marked decline in sales revenue" in 2016 for passenger car brands, including Audi, seat and Skoda.

"2016 will be a transition year for Volkswagen ... we remain confident that our operating business again will record solid growth this year," added Mr. Mueller.

VW shares fell 3% in Frankfurt for € 133.57 and down 40% over the last 12 months.

Ana Nicholls, automotive analyst at the Economist Intelligence Unit, said: "The unit sales continue to rise, up 0.8% in the first quarter of 2016, shows that customers care about scandal emissions from investors and the media do.

"Ironically it means Volkswagen is now on track to become the world's largest vehicle maker this year, given that Toyota and General Motors have both tables seen falling back so far."