In the wake of a solid first quarter that saw Volkswagen AG increase its sales, revenue and operating profit, the auto maker cautions there is only “modest” growth ahead.

VW reports global sales of 1.36 million units, up 15.1% compared with the first quarter of 2005. And its sales revenue jumped 21.4% to €25.3 billion ($31.9 billion), which contributed to a 55.1% hike in operating profit – before special items – to €726 million ($917 million).

Meanwhile, the auto maker’s VW and Audi brands report sales increases of 16.1% and 13.4%, respectively. They also show corresponding earnings hikes with Audi recording a 5% jump in operating profit to €318 million ($401 million), and VW being €134 million ($169 million) in the black – a positive swing of €187 million ($236 million).

VW’s performance in the passenger-car market was its best first quarter in the auto maker’s history.

This time last year, the company’s core brand reported a €53-million ($67 million) loss.

Volkswagen AG’s commercial-vehicle business and its financial services division were similarly profitable.

“The most important automotive markets began 2006 with a positive underlying trend, although the continued risks for automotive demand posted by the economic environment are not insignificant,” VW says in its earnings report.

High energy rates and volatile commodity prices are among the biggest threats the industry faces, VW says, adding these factors will contribute to flat demand in the U.S. and Western Europe – with the exception of Germany.

“The German passenger-car market is expected to grow slightly,” VW claims. “In the Chinese and South American/South African markets, we are forecasting moderate growth in delivery volumes, which means that we can expect a slight increase in global deliveries to customers overall.”

This will help mitigate the negative effects of rising material costs and the financial toll of VW’s ongoing restructuring.

“The resulting sales revenue, as well as the measures to reduce materials costs and optimize production processes … will help achieve a year-on-year improvement in 2006 operating profit.”

Consumer reaction to its new models was critical during first quarter, year, VW adds.

“The new Fox, Jetta, Passat (sedan), Passat Variant and SEAT Leon models helped lift the delivery figures considerably (in Europe),” VW says.

There also was “significant growth” in demand for the Golf plus, Audi A3, Audi A6 and Audi A8, Škoda Octavia, Multivan/Transporter and Caddy. This contributed to VW’s 18.7% market share growth in Europe, an increase of 1.7%.

“In January, almost one in three newly registered passenger cars in Germany was a Volkswagen Group vehicle,” VW says.

Last month, Volkswagen AG CEO Bernd Pischetsrieder re-committed the auto maker to achieve a pre-tax annual profit goal of €5.1 billion ($6.4 billion).