SEOUL (Reuters) -- Hyundai Motor Co. is expected to post a 48 percent rise in quarterly profits on Monday, helped by rising exports of its new models to the key U.S. market and to Europe.
Hyundai, 10 percent owned by DaimlerChrysler AG, has invested heavily to improve the quality of its cars, launching new models such as the New EF Sonata mid-sized sedan and the Santa Fe sport utility vehicle. A generous warranty policy has also lifted sales.
Hyundai is expected to keep growing profits through the second half as a rebounding domestic economy adds to robust export sales, particularly to Europe where the strong euro has made Korean imports more competitive.
A near seven-week strike that cost Hyundai $1.2 billion in lost output is not seen hurting profits much as it whittled away costly inventories and costs were lower, while workers were unpaid, although longer-term analysts are concerned about an 8.6 percent pay increase agreed to end the strike.
For the second quarter, Hyundai is expected to earn a net profit of 454 billion won ($383.2 million), according to three analysts polled by Reuters. This compares with a profit of 306.8 billion won a year ago.
Sales for the three months ended June 30 are expected to have risen to 6.74 trillion won from 6.2 trillion won.
"In spite of weak domestic sales, Hyundai Motor has benefited from robust exports," said Chae Kyoung-Sup, an auto analyst at Shinyoung Securities.
The auto maker is betting on exports to drive growth this year in the wake of weak demand at home, where the economy is struggling to emerge from a recession in the first half.
Hyundai saw exports during the first half of this year rise 30 percent from a year ago to 627,728 vehicles.
In contrast, domestic sales fell 11 percent to 342,914 vehicles as South Korea slipped into its first recession in five years due largely to a diplomatic standoff over North Korea's nuclear arms program and falling domestic consumption on steps to curb household debts.
Analysts said they expected Hyundai to have set aside less money for provisions, after it tucked away more than 200 billion won last year to cover toughened European Union environmental regulations and over 500 billion won for warranty pledges in the U.S. market.
"A large factor in the latest earnings projection is that Hyundai Motor is expected to have set aside less money for provisions this year," said Kang Sang-Min, an analyst at Tongyang Investment Bank.
The auto maker offers a 60,000-mile (97,000-km) bumper-to-bumper warranty and a 10-year 100,000-mile powertrain warranty covering engine and transmission for automobiles sold in the U.S. market.
For the full year, Hyundai has forecast 28.2 trillion won in sales, which excludes sales from its overseas plants, up from 26.3 trillion won last year.
Hyundai saw U.S. sales decline 5 percent to 36,316 units last month after its unionized workers staged nearly seven weeks of partial strikes to seek higher wages.
Analysts said Hyundai should see domestic sales pick up in the months ahead due to a government tax cut on automobile purchases to spur spending.
"The product mix for Hyundai vehicles are expected to improve," said Cho Soo-Hong, an auto analyst at Dongbu Securities.