Europe's largest car maker, Volkswagen, has seen its net profits halve during the July to September quarter.

Volkswagen was hit by weak equity markets which had forced it to write off losses from investments.

The German automotive giant - which owns brands including Audi, Seat, Skoda and VW - has also blamed weak demand in Europe, North America and South America for its ageing model range.

This situation should improve over time since the company has recently launched several new models.

But the introduction of new models has in itself weighed heavily on the group's balance sheet, pushing operating profits lower.

Mixed reception

Volkswagen's net profits fell to 439m euros (�277m; $439m) during the quarter from 903m euros during the same period last year.

Analysts had expected net profits in the region of 600m euros.

Operating profits fell too, down 32% at 1.18bn euros, due to unfavourable currency moves, higher warranty costs and expenses linked to the introduction of new models.

Pre-tax profits fell 48% to 711m euros while sales rose 2.2% to 21.2bn euros.

Initially the stock fell 1.5% as traders expressed disappointment at the seemingly weak performance, but it soon bounced back as analysts reflected further on the figures.

Tricky comparison

By 0840 GMT, the stock was trading 1.6% higher on the day.

"Pre-tax is down largely due to the writedown of securities. Operating margins are quite solid," said Goldman Sachs analyst Max Warburton.

Furthermore, whereas this year's weak net profits were hit by a writedown against investment losses, last year's strong net profits were boosted by a write-back of provisions which had been set aside to cover losses which never occurred.

For the year as a whole, the company expected to meet its previous sales and profits forecast.

"We confirm our forecasts from the half-year report of worldwide deliveries to customers of just under 5 million vehicles and a profit before tax in the range of 4bn euros," the company said.