Hyundai posts $2 billion Q3 profit on gains from anti-Japan protests
TOKYO (Bloomberg) -- Hyundai Motor Co. said its third-quarter profits gained 13 percent as it benefited from anti-Japan protests in China and the i10 minicar helped the company buck the economic slump in Europe.
Third-quarter net income climbed to 2.17 trillion won ($2 billion), from 1.92 trillion won a year earlier, the Seoul-based company said today.
The carmaker said it will probably beat its full-year sales forecast as deliveries climb 8.2 percent in the fourth quarter, led by demand in China. Hyundai benefited last month from flaring anti-Japan protests in China over a territorial dispute, which helped cushion the fallout from a seven-week labor strike that cost the carmaker an estimated 1.7 trillion won in lost production.
"There were concerns over Hyundai's quarterly earnings up until the last moment as production was disrupted by strikes and holidays at overseas plants," Shin Chung Kwan, an analyst at KB Investment & Securities Co. in Seoul, said by phone. "The company will have no trouble making up for the loss through extra work and shifts at plants this quarter and will meet its annual target."
Hyundai on Sept. 4 agreed to raise compensation, on average, by 27.3 million won per person and end overnight shifts, according to the union. That ended Hyundai's first strikes since 2008, which caused 82,088 vehicles in lost output, according to company estimates.
The stoppages, which began mid-July, led third-quarter exports from South Korea, home to 46 percent of Hyundai's production capacity, to fall 14 percent, according to the company's Web site. Sales at home shrank 8.3 percent.
While Hyundai has periodically faced disruptions in the past four years because of labor disputes, none were legally sanctioned and they rarely lasted beyond several hours. The last formal strike occurred in 2008, when a 12-day walkout cost the company an estimated 691 billion won, according to Hyundai.
The 2.17 billion won profit during the quarter beat the 2.05 trillion-won average of 27 analysts' estimates compiled by Bloomberg.
Hyundai is on its way to exceeding its sales target this year as deliveries reach 1.2 million units during the fourth quarter, Chief Financial Officer Lee Won Hee said today during a conference call. The company had forecast in January that global deliveries would rise 5.7 percent to 4.29 million vehicles in 2012, including a 15 percent increase in Europe and a 6.8 percent gain in China.
The global automobile market will probably increase 3.6 percent next year as the U.S. grows 4.1 percent and India 8 percent, Lee said. European demand will probably fall 1.7 percent to 13.8 million units next year, he said.
Hyundai and affiliate Kia Motors Corp., both headed by Chairman Chung Mong Koo, said earlier this month that combined sales in China will probably exceed their target of 1.25 million units after September deliveries climbed to a record.
China sales for Hyundai will probably be between 830,000 to 840,000 units this year, versus the company's original target of 790,000, as the company benefits from the drop in demand for Japanese brands in the country, Lee said. The company sold 739,800 vehicles in China last year.
Consumers in China avoided buying Japanese-branded vehicles after rioters torched dealerships and smashed cars, violence triggered after Japan's government last month bought a group of islands claimed by both countries. Sales of Japanese brands tumbled 41 percent in September in the world's biggest car market, the state-backed China Association of Automobile Manufacturers said Oct. 10.
Hyundai will start producing a mid-size sedan model -- bigger than the Elantra and smaller than the Sonata sedan -- in its new plant in China this year, along with the Elantra Yuedong and the Santa Fe sport utility vehicle, Lee said.
In the U.S., the company's second biggest market, third-quarter sales at Hyundai rose 7.7 percent, trailing the industry's 14 percent gain, as deliveries of the Sonata and Santa Fe fell 3 percent and 29 percent, respectively. The Korean carmaker ceded market share after Japanese carmakers, recovering from last year's earthquake and floods, released new competing models.
Nissan boosted U.S. sales of its Altima sedans 12 percent to 76,939 units last quarter, according to industry researcher Autodata Corp. Nissan began sales of the 2013 Altima in July.
Honda Motor Co. introduced a redesigned version of its Accord sedan, the second-best selling car in the U.S., in September. Sales of the model, Honda's biggest seller in the U.S., jumped 72 percent to 92,669 units last quarter.
Last month, Hyundai increased deliveries 15 percent in the U.S., where sales expanded at the fastest rate since March 2008 as buyers took advantage of cheap financing for cars and trucks.
Automakers sold cars and light trucks at an annualized rate of 14.94 million, after seasonal adjustments, the best pace since March 2008. Banks now are charging auto buyers record-low interest rates and carmakers have offered zero-percent financing to attract customers.
In Europe, Hyundai gained market share as it benefited from demand for the Tucson SUV and the i10 minicar, bucking a slump in demand that's leading auto sales in the region to their fifth consecutive year of declines.
Hyundai's operating profit in the quarter rose 3.1 percent to 2.06 trillion won, versus the 2.09 trillion won average estimate compiled by Bloomberg. That compares with the 19 percent decline reported yesterday by Volkswagen AG, Germany's largest automaker, as demand in Europe slumped.Contact Automotive News