Hyundai Motor Q4 profit jumps on record U.S. sales
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February 13, 2004 12:00 AM

Hyundai Motor Q4 profit jumps on record U.S. sales

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    SEOUL -- South Korea's top auto maker, Hyundai Motor Co., reported an 80 percent jump in quarterly profit on Friday, fuelled by record U.S. sales of its New Sonata sedan and Santa Fe sport utility vehicle.

    But sluggish domestic sales, hit by tighter lending rules and a mountain of unpaid credit card bills, have cast a shadow over the near-term outlook for sales.

    "I don't see any strong momentum building up for Hyundai at the moment, with the domestic economy remaining weak and the Korean won spiking up to hurt exports," said Mun Jang-ju, a fund manager at Tong Yang Investment Trust & Management.

    Mun said it would be difficult to expect new earnings growth in the immediate future for Hyundai since the car maker plans to roll out new models after April.

    "I've already slashed Hyundai shares in my portfolio," said Mun.

    Helped by a weaker local currency that made Korean products cheaper in overseas markets, auto makers played a key role in pulling the South Korean economy out of a prolonged slump by ramping up shipments last year. But the won has crept up since late 2003 to four-month highs versus the dollar.

    "Troubles in the credit card sector, a surge in oil prices, unstable exchange rates and economic uncertainties remain this year," Hyundai's president, Park Hwang-ho, told analysts.

    EXPORTS DRIVE STRONG GROWTH

    Exports, which make up 60 percent of Hyundai's earnings, rose 11 percent to 424,413 units in the fourth quarter from a year earlier, while local sales fell 15 percent to 149,634 units.

    Hyundai, 10-percent owned by U.S.-German auto maker DaimlerChrysler AG, posted a net profit of 460 billion won ($396.5 million) for the quarter, versus 253.9 billion a year earlier, according to Reuters calculations based on annual profit data. Sales rose seven percent to 7.3 trillion won from 6.8 trillion.

    The profit was broadly in line with a consensus forecast of 469.6 billion won in a Reuters survey of five analysts.

    The earnings growth topped a 60 percent rise in quarterly profit for Japan's top auto maker, Toyota Motor Corp.

    Hyundai's improving product quality and more popular designs contributed to the higher foreign sales. The South Korean auto maker jumped to 13th place from 23rd in California-based research firm J D Power's long-term vehicle quality rankings last year. It is now ahead of Volkswagen AG in the rankings.

    Hyundai ranks seventh in the United States with a 2.5 percent market share, just behind Nissan Motor Co. and above Mitsubishi Motors Corp.

    "We will continue to strengthen overseas marketing on premium vehicles to improve profitability," Park told analysts.

    Solid foreign demand in 2004 should put Hyundai on track to achieve record sales of 2.145 million vehicles, analysts said.

    Hyundai Motor, which controls nearly half of the South Korean auto market, has seen three consecutive years of record sales.

    OVERSEAS INVESTMENT

    As part of its expansion overseas, Hyundai said it was considering an initial investment of 700 million euros ($897.2 million) in its proposed European plant, with both Slovakia and Poland vying for the 1.1 billion euro deal.

    "It's really hard to put one thing above the other," Park said. "Business growth potential is the decisive factor to look at in the end."

    Hyundai said the North American markets accounted for 51 percent of total exports while Europe took 28.5 percent.

    But overall sales by Hyundai and its smaller rivals fell a combined 10 percent in January as debt-laden domestic consumers were reluctant to shell out on new cars. This more than offset strong exports.

    The weak sales were also due in part to a three-day Lunar New Year holiday in January, auto makers said. Local sales fell 39 percent, eclipsing a 27 percent jump in exports.

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