Volkswagen Q1 operating profit rises 10% on higher demand at Audi

MUNICH -- Volkswagen Group reported a 10 percent gain in first-quarter operating profits on higher demand at its Audi luxury brand.

In a statement released earlier today, VW said operating profit rose to 3.21 billion euros ($4.26 billion) from 2.91 billion euros a year earlier. The figure beat the 2.66 billion-euro average estimate of nine analysts surveyed by Bloomberg.

Sales gained 26 percent to 47.3 billion euros.

Volkswagen is thriving despite Europe's debt crisis. The German automaker is stealing market share from rivals with a model lineup that runs from the Up minicars to Lamborghini sports cars and 50-ton trucks.

The group's worldwide unit sales increased by 11.3 percent to 2.3 million vehicles in the quarter, boosting the automaker's global passenger car market share to 12.2 percent from 11.9 percent.

The automaker stuck to its target of matching last year's record operating profit of 11.3 billion euros as higher revenue and auto deliveries offset increased development spending.

Relying on continued expansion of car markets in Asia, the United States, Latin America and Russia, VW also stood by its goal to increase deliveries beyond last year's record 8.3 million vehicles.

"The outlook seems conservative after the first quarter, which should have been the toughest this year," said Juergen Pieper, a Bankhaus Metzler analyst in Frankfurt. "The results are very strong."

All group divisions, except the Spanish unit Seat, posted increased profit for the quarter. Operating profit at the core VW brand grew 5.3 percent to 1.1 billion euros. Audi's profit rose by 26.6 percent to 1.4 billion euros.

The group's Skoda brand posted an 11.8 percent rise in profit to 209 million euros while Seat's quarterly loss widened by 17 million euros to 29 million, hit by the declining Spanish passenger car market.

VW'S UK-based ultraluxury unit, Bentley, increased profit by 40 million euros to 15 million euros, helped by strong demand in China and the United States.

Earnings also gained following the inclusion of 223 million euros in profit from German truckmaker MAN SE, which VW now controls with a 73 percent stak

Warning signs

VW warned last week that the debt crisis in Europe heightens risks for the auto industry this year.

Auto demand in Europe dropped 7.3 percent in the first quarter, while industrywide deliveries in China slipped 1.3 percent, increasing stockpiles of unsold vehicles in the world's biggest car market.

Volkswagen has so far been resistant to the woes in its home region, buoyed by growth in the U.S. and Russia.

Uncertainty over market developments hasn't stopped VW from expanding as it seeks to overtake General Motors Co. as the world's largest carmaker.

Last week, the Audi unit agreed to purchase Italian motorcycle maker Ducati.

VW also announced plans last week to build a new plant in western China as it seeks growth beyond the country's bustling coast and signed off on a new Audi factory in Mexico, the brand's first in North America.

Some other VW expansion efforts are incomplete. The integration of Porsche SE's carmaking unit continues to face "some hurdles," CEO Martin Winterkorn said last week in Hamburg at the company's annual meeting. Even with delays caused by legal tangles, VW said that the combination with the maker of the 911 sports car will be finalized.

Bloomberg and Reuters contributed to this story