FRANKFURT (Reuters) - Daimler DAIGn.DE reported a slight rise in third-quarter operating profit on Thursday, boosted by sales of Mercedes-Benz cars, sending its shares higher, but announced cost cuts and warned legal provisions tied to diesel litigation could rise.

FILE PHOTO: The Mercedes-Benz logo is seen before the company's annual news conference in Stuttgart, Germany, February 4, 2016. REUTERS/Michaela Rehle

Group earnings before interest and taxes (EBIT) rose 8% to 2.69 billion euros, up from 2.49 billion euros in the year-earlier period, boosted by an 8% rise in sales of luxury cars and solid cashflow.

Daimler shares were up 4.1% in afternoon trading.

Daimler said it would review costs after the margin at Mercedes-Benz Cars dropped to 6% from 6.3% a year earlier due to production problems with the Mercedes GLS and because cars were being fitted with costly anti-emissions filters.

“In order to master the transformation in the next few years, we need to increase our efforts considerably: we have to significantly reduce our costs and consistently strengthen our cash flow,” Chief Executive Ola Kaellenius said, without elaborating.

Separately, Manager Magazin reported that, departing from the course taken by his predecessor Dieter Zetsche, Kaellenius wanted Daimler to return to its roots as a car maker rather than reinvent itself as a high-tech mobility provider.

In a presentation to the Daimler board at the end of September, Kaellenius said he wanted to cut funding to startups, reduce spending on autonomous driving research and scrap plans to build a fully autonomous version of the electric S-Class EQS, Manager Magazin reported. It added there was a sales target of 20,000 such vehicles.

A spokesman at Daimler said he could not confirm there was a plan for a fully autonomous S-Class with such a sales target.

Daimler will continue to develop the technology with Bosch and BMW, the spokesman added. The idea would be to target those autonomous cars for fleet customers with robotaxis rather than selling these cars in bigger numbers to private car owners.

The company said in a statement that “autonomous driving remains a key technology for Daimler.”

NO U-TURN ON STRATEGY

Philippe Houchois, analyst at Jeffries who has an underperform rating on Daimler, said the third-quarter results revealed disappointing margins at Mercedes cars and weaker-than- expected profit at the trucks division but solid cashflow.

Daimler is due to give a detailed presentation on strategy and costs on Nov. 14 and Chief Financial Officer Harald Wilhelm said investors should not expect a strategy U-turn.

Daimler reiterated that it expected group earnings before interest and taxes to be significantly lower in 2019 than last year, and warned it now expects revenue at the trucks division to be at the year-earlier level instead of growing slightly.

Daimler said current legal proceedings tied to diesel emissions may result in additional expenditures which may hit profits at Mercedes-Benz Cars and Mercedes-Benz Vans.