April 28, 2017 / 7:04 AM / 4 months ago

UPDATE 1-Geely's Volvo Cars sees higher sales in 2017 after earnings rise

* Q1 operating profit up 11 pct at 3.5 bln SEK

* Sales of 47.6 bln, up from 42.0 bln

* U.S. sales down 18 pct (Adds detail, background)

STOCKHOLM, April 28 (Reuters) - Geely-owned automaker Volvo Car Group reported a rise in first quarter operating profit on Friday as strong demand for its XC60 and 90 series cars gave it a boost, and stuck to a forecast of higher sales this year.

Volvo, bought by China's Zhejiang Geely Holding Group Co. from Ford Motor Co. in 2010, said earnings rose to 3.5 billion Swedish crowns ($396 million) from 3.1 billion in the year-ago quarter.

Gothenburg-based Volvo's sales rose to 47.6 billion crowns from 42.0 billion a year ago while its operating margin inched down to 7.3 percent from 7.5 percent.

Volvo said launch costs for the new 90 series cars and the new XC60, as well as investments in new technologies and hiring new staff, had weighed on profitability.

It has invested in new models and plants to secure a niche in the premium auto market dominated by Daimler's Mercedes-Benz and BMW.

Volvo said it had sold 129,148 cars in the quarter globally, an increase of 7 percent, with sales in China up 19 percent and a rise in the EMEA region of 9 percent.

In the United States, Volvo's sales fell 18 percent, affected by a move to centrally distribute its 90 series cars to all markets.

"While low financing rates and a solid economy continue to support sales, rising interest rates and falling used-vehicle prices threaten further U.S. auto market growth in 2017 after the record auto sales high in 2016," Volvo said in the report.

Last year Volvo took steps toward an eventual listing, raising 5 billion crowns from Swedish institutional investors through the sale of newly issued preference shares.

It reported record high sales of 534,332 cars in 2016. One of Sweden's largest companies by sales and number of employees, Volvo has set an annual sales goal of 800,000 cars in the medium term.

$1 = 8.8374 Swedish crowns Reporting by Helena Soderpalm and Johannes Hellstrom; Editing by Adrian Croft

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