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Audi sticks to profit margin goal despite costs of growth

BERLIN (Reuters) -- Audi stuck to its full-year profit target even as higher investment costs on plants and technology inflicted a double-digit drop in third-quarter earnings.

Audi reaffirmed its goal to achieve an operating profit margin "at the upper end" of a target range between 8 percent and 10 percent this year, even as third-quarter operating profit plunged 17 percent to 1.10 billion euros ($1.49 billion).

The Volkswagen Group unit is pushing costly overseas expansion, adding capacity in China, Mexico and Brazil as the brand aims to topple premium-sales leader BMW by the end of the decade. Audi's second Chinese factory will start production at the end of the year while the carmaker is spending almost 1 billion euros ($1.35 billion) on a new site in Mexico to build the next generation of the Q5 SUV from 2016. "We're making high upfront expenditures and investments now and in upcoming years in order to create an even stronger global position for Audi," finance chief Axel Strotbek said in the quarterly earnings statement today.

Profit from Audi, which accounts for about 40 percent of VW group operating earnings, is key to VW's plan to surpass General Motors and Toyota Motor Corp. as the world's biggest carmaker by 2018.

Daimler's Mercedes-Benz unit, which also includes the Smart minicar brand, posted a 23 percent jump in third-quarter earnings before interest and tax (EBIT) to 1.2 billion euros. However, Audi's third-quarter operating margin of 9.4 percent beat the 7.3 percent return on sales at Mercedes.

BMW will report third-quarter figures on Tuesday.

Audi also stood by a goal to hit its sales target of 1.5 million cars and SUVs in 2013, two years early.

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