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Volkswagen sees stronger operating profit rise in tough market thanks to cost management

FRANKFURT – German automaker Volkswagen AG said Wednesday its operating profits rose 20 per cent in the third quarter as the company focused on holding down costs in a tough sales environment.

The profits, which are measured before taxes and interest, rose to 2.78 billion euros ($3.8 billion) from 2.32 billion euros even as sales revenue fell 3.8 per cent to 46.98 billion euros. Volkswagen shares rose 4.3 per cent to 175.05 euros in midday trading in Europe.

“We are focusing on disciplined cost and investment management” given that “the economic environment is not expected to improve in the short term,” CFO Hans Dieter Poetsch said in a statement.

The operating figures contrast with those for bottom-line net profit. Volkswagen’s net profit fell to 1.9 billion euros from 11.3 billion euros in year-ago quarter, when figures were distorted by a large accounting gain from the takeover of Porsche AG. Operating profit figures exclude such financial items and in some cases can give a clearer picture of how a company’s business is developing.

Volkswagen has faced a tough market for cars in Europe, where sales have sagged because of slow growth and high unemployment in countries struggling with debt, particularly Spain, Italy, Greece, Ireland and Portugal.

Stronger sales in the United States and China have supported profits, along with the company’s high-priced luxury brands Audi and Porsche. Sales of such vehicles can be more recession-proof and carry fatter profit margins. The company also sells cars under the SEAT, Skoda, Bentley, Lamborghini and Bugatti brands.

Volkswagen’s worldwide vehicle sales increased 3.6 per cent in the quarter to 2.38 million, even as they slipped 4.1 per cent in the company’s home market in Germany.