Volkswagen has lowered its full-year profits forecast after reporting a decline in first-half sales and pre-tax profits, the Financial Times (FT) said.

However, the first-half results beat expectations, the newspaper said, and helped VW shares to rise in a falling German stock market.

The FT said that the VW group expects 2002 pre-tax profits of about €4 billion, having previously said it would match last year’s €4.4 billion.

The newspaper noted that the reduced estaimate came as little surprise because industry analysts had long expected VW to cut its forecast.

According to the Financial Times, VW said its previous earnings forecast was based on expectation that economic conditions in the US and western Europe would improve in the second half of the year.

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“This is not recognisably the case, especially in western Europe,” VW said, according to the FT.

The FT said that shrinking demand in Europe, the US and South America, an ageing model range, poor demand in VW’s German home market, the strengthening of the euro and a poor economic situation in Brazil have also affected the company’s results.

The FT said VW expected sales of just under five million vehicles, in line with earlier comments that it might not be able to match last year’s five million.

Deliveries in the first half were down 5.4% at 2,514,000 vehicles, and unit sales were 8.4% lower from last year, at 2,495,000, the FT added.

However, the FT said that VW’s 13.5% increase in second-quarter pre-tax profits to €1.266bn, and a 1% easing in sales to €22.79bn, were ahead of expectations.

Lower material and logistics costs and the group’s strategy of keeping prices steady despite shrinking vehicle markets are helping to offset lower unit sales, the newspaper said.

VW shares rose 4.7% to €46.74 in late trading in Frankfurt, the Financial Times added.