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Automaker Daimler sees 20 per cent profit rise thanks to record sales of Mercedes brand

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FRANKFURT - Record sales of its luxury Mercedes brand and a boost from its financial services arm helped automaker Daimler AG increase net profit by 20 per cent to €1.42 billion ($1.88 billion) in the first quarter.

The increase came despite a slip in profitability at Mercedes, where the company spent more on new models that should drive future profits and on increased production capacity.

Global revenues rose 9 per cent to €27.01 billion and the company sold 9 per cent more vehicles worldwide, at 502,086.

Both the sales and net profit figures beat the average analyst estimate compiled by FactSet, which foresaw profit of €1.22 billion. Daimler shares rose 3.2 per cent to €42.66 in morning trading in Europe.

Mercedes and the company's truck division saw lower earnings as they increased spending on new models in hope of positioning the company for higher earnings in future quarters.

Earnings slipped 3 per cent at the Mercedes-Benz Car division, the company's biggest. Daimler said spending on expanded production capability, new technology, and upcoming new vehicles weighed on the results, as did what it called temporarily weaker pricing in the crucial Chinese market. A break in production as a result of expanding a Beijing plant led to a restriction in the availability of many models on the Chinese market in the first quarter.

Still, Mercedes sold a record 313,902 vehicles in the first three months of the year. That included a 12 per cent rise in a difficult market in Western Europe, where the economy has been shaken by the debt crisis afflicting countries that use the euro currency.

Daimler CEO Dieter Zetsche, who also heads the Mercedes division, called it "a strong quarter."

"Despite higher investment in future growth and a challenging market environment, we succeeded in surpassing the very good prior-year results," he said in a statement.

The company reaffirmed its cautious outlook for the year, saying earnings before interest and taxes would match last year's. It also said that Mercedes would equal last year's profit.

Earnings were helped by a stronger performance from the company's financial services division, where earnings rose 7 per cent, and from accounting for its ownership share in aerospace firm EADS. The financial category where the EADS stake is accounted for went from a loss of €131 million to a gain of €86 million.

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