VOLKSWAGEN AG, Europe's largest car maker, said first-quarter profit rose 26 percent after the company cut jobs in Germany and lured buyers with the new Tiguan compact sport-utility vehicle and an upgraded Audi A4 sedan.

Net income increased to 929 million euros (US$1.48 billion) from 740 million euros a year earlier, the car maker said in a statement yesterday. Analysts surveyed by Bloomberg News had predicted 924 million euros, based on 13 estimates. Sales advanced 1.4 percent to 27 billion euros.

Chief Executive Officer Martin Winterkorn boosted profit after adding models and cutting the VW-brand workforce in western Germany by 20 percent. The car maker forecast record sales this year after first-quarter deliveries rose 7 percent to 1.57 million vehicles on demand from China and Brazil.

"VW is showing an ongoing trend of business and efficiency improvement," said Michael Tyndall, an analyst at Nomura Securities in London with a "buy" rating on the stock. "The outlook for the full year remains positive in spite of a tough environment, with management optimistic about the launch of new models and growth in emerging markets."

Volkswagen was trading down 4.25 euros, or 2.2 percent, at 187 euros as of 11:39am in Frankfurt.

The stock has gained 20 percent this year, giving a market value of 65.6 billion euros. Tyndall said the shares are priced "well above" the company's true valuation because of takeover interest from German sports-car maker Porsche SE.

"We are optimistic about achieving our targets," Winterkorn said.