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VW Q2 profit grows on Europe recovery, cost cuts

BERLIN, July 29 (Reuters) - Volkswagen posted a 4.9 percent gain in second-quarter earnings, benefiting from improving auto demand in higher-margin western European markets and cost cuts.

Operating profit at Europe's largest carmaker rose to 3.49 billion euros ($3.85 billion), VW said on Wednesday, in line with the average estimate of 3.48 billion euros in a Reuters poll of analysts.

"VW is very well positioned in an increasingly difficult market environment," Chief Executive Martin Winterkorn said.

The German group predicted auto sales to be flat on year-ago levels, toning down its guidance which previously called for a "moderate" increase from last year's record 10.1 million cars.

VW stuck to its outlook for profit and revenue, saying the operating margin may come in between 5.5 and 6.5 percent this year, after 6.3 percent last year.

Revenue may rise as much as 4 percent from 202.5 billion euros in 2014.

($1 = 0.9056 euros) (Reporting by Andreas Cremer; Editing by Maria Sheahan)