SEOUL -- South Korea's top car maker, Hyundai Motor Co., posted a fall in quarterly profits on Tuesday because of a sixfold jump in spending on r&d, aimed at boosting sales with new models.
But it is hoping for a profit rebound later this year on brisk sales of its new models, which include the EF Sonanta sedans, particularly in the United States, where it is increasing sales faster than its Japanese rivals.
The European Union is another good bet, Hyundai's Chief Financial Officer Chae Yang-ki said, with the company taking advantage of the strength of the euro against the won.
"The first quarter was the worst for Hyundai. But the situation seems to be getting better from April," said Choi Yong-kyu, a fund manager at KEB Commerz Investment Trust Management.
Shares in Hyundai Motor, the country's seventh-biggest stock with a market value of more than $5 billion, closed down 3.11 percent at 29,600 won, compared with the benchmark index, which was down 2.7 percent. The stock has outperformed the market by seven percent this year.
BEAT ANALYSTS' FORECASTS
The maker of Santa Fe SUVs and Elantra compacts earned 417.6 billion won ($350.6 million) for the three months ended March 31, compared with 586.6 billion won a year ago. The profit beat analysts' forecasts of 336.6 billion, because Hyundai provisioned less than expected on warranty costs.
R&d spending in the first quarter jumped to 58.5 billion won from 9.7 billion won a year ago.
Affiliate Kia Motors Corp. saw profit rise more than 40 percent thanks to brisk sales of recreation vehicles and forecast a bright outlook for the year.
Hyundai is betting on exports, mainly to the United States, to drive growth this year in the wake of weak demand at home.
"We plan to boost our brand value in the large passenger car segment in the U.S. market," Chae told investors.
At present, its bread-and-butter models in the United States are compacts and mid-sized automobiles. It lacks a wide range of models to compete with rivals in the large car segment.
Chae said Hyundai, 10 percent owned by DaimlerChrysler, would reach its sales targets largely by "creating demand through new models and incentives."
The South Korean carmaker said it expected 28.2 trillion won in sales this year, which excludes sales from its overseas plants, up from 26.3 trillion won last year.
The carmaker hopes to sell 1.82 million vehicles this year versus 1.72 million a year ago, with a strong rise seen in exports to North America.
It also expects operating profit to rise 44 percent in 2003 from a year ago to 2.3 trillion won and plans 2.6 trillion won in investments, up 73.3 percent.
"Sales rose mainly due to strong demand for higher-value-added automobiles such as the Santa Fe sports utility vehicle and the New EF Sonata mid-sized sedan," it said.
Hyundai's sales rose to 6.09 trillion won in the first quarter from a revised 5.69 trillion a year before. A weak South Korean won against the euro in the first quarter also helped sales in Europe, making Hyundai cars cheaper to buy.
Chae told Reuters Hyundai planned to boost European exports "as much as capacity allows," taking advantage of a strong euro.