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Daimler AG, the producer of luxury Mercedez branded cars, posted significant gains in second-half earnings as the European auto market bottoms out and new models spur demand. The German automaker hinted a recovery in the West European car market later this year as it reported a big jump in its second-quarter net profit as it sold its stake in aerospace firm EADS.

“Profits have already improved and the majority of the planned savings are expected in the second half of the year,” said Daniel Schwarz, a Frankfurt-based analyst with Commerzbank. “This gives increased confidence that the earnings will improve sequentially in the coming quarters.”

The Stuttgart-based company reported today that net profit rose to 4.58 billion euros ($6.04 billion) from 1.56 billion euros in the same quarter a year before. Sales added 3% to 29.7 billion euros. The luxury car-maker saw a gain of 3.2 billion euros from disposing of its remaining stake in EADS, the parent company of plane maker Airbus. Daimler made the move to concentrate better on its core auto business.

The company said that the suffering Western European car market “seems to have bottomed out” and that “a gradual improvement of the market situation is to be anticipated in the second half of the year.” The overall market is still expected to be in negative territory for the full year, the company said. European car sales have been hurt by the continents financial and economic crisis. Sales fell 6.6% in Europe over the first six months of the year compared to the same period last year, according to the European car-makers association ACEA.

Daimler CEO Dieter Zetsche said the result “represents progress in our earnings development, but no cause for complacency. We will continue to work hard on achieving our goals.”
The companys flagship Mercedes-Benz Cars division, saw operating earnings sink due to a less profitable model mix and expenses for new technologies and vehicles. Profits excluding financial items such as interest and taxes fell 22% to 1.04 billion euros.

Daimler shares rose 0.5% to €52.95 in morning trading in Europe. They have been up more than 27% on a year to date basis.

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