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Volkswagen group profits rise by a quarter, but outlook disappointing

Volkswagen has reported a strong increase in group profits for the first quarter of 2014. But while the German carmaker’s luxury brands were shining, sales of its mass market cars crumbled.

Volkswagen (VW) group profits jumped to 2.47 billion euros ($3.42 billion) in the first quarter of 2014, according to the earnings report released by Germany's largest carmaker on Tuesday.

Net profit had been 26.8 percent higher than in the same three-month period last year, when VW had earned 1.95 billion euros, the company said.

The increase came on the back of a 2.7 percent rise in revenue, which jumped to 47.8 billion euros in the quarter. It surprised analysts, who had penciled in a lower profit as a result of a strong euro and tight car markets, notably in Europe.

“We must now continue improving our position and maintain our successful course as part of the systematic implementation of our Strategy 2018,” said VW Chief Executive Martin Winterkorn.

How VW plans to become Number One

VW aims to become the world's largest carmaker by 2018. The German car group is still behind Japan's Toyota, and just ahead of US-based General Motors.

In the 12-brand VW group, premium carmaker Audi made the biggest contribution to the gains, logging an operating profit of 1.3 billion euros, on par with the first quarter of 2013. Sports car manufacturer Porsche increased its operating profit to 698 million euros in the period.

The mass market Volkswagen brand, however, earned less with 440 million euros, compared with 590 million euros a year ago.

VW's Chief Financial Officer Hand Dieter Pötsch warned that global conditions for carmakers remained difficult. He said the group needed to continue to cut costs and keep a focus on margins and profitability in all sales regions.

VW's outlook disappointed investors. On Tuesday, VW shares slumped 1.3 percent in trading at the Frankfurt Stock Exchange. Investors had been selling the stock in expectation of more moderate growth in future, market analysts told the Reuters news agency.

uhe (Reuters, AP, dpa)

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