SEOUL -- Hyundai Motor Co. increased third-quarter profits by 49 percent from last year's strike-hit levels, though soft local sales saw profits dip from the second quarter.
But affiliate Kia Motors Corp.'s profit dipped 2 percent as foreign exchange losses and marketing costs ate at the bottom line, despite sales rising by a third.
Hyundai, a rising star on the world auto market, should see good volume and market share growth this quarter as new models lure shoppers, despite soaring oil and steel prices and cutthroat competition.
Hyundai, whose $10 billion market value ranks it sixth on Seoul's main stock market, is seen pushing up 2004 net profit by 15 percent to more than $1.77 billion and to $2.04 billion in 2005, according to Reuters Estimates.
Investors are keen to see how the new flagship NF Sonata fares next year in the United States where, with a 2.5 percent share, Hyundai is the No. 7 carmaker. Sales of the new model begin in Europe this quarter.
"Although third-quarter profit fell from the second, we're seeing the positive impact from new models such as NF Sonata. Sales rose in September, and Hyundai has been increasing its market share in the United States steadily," said Kim Jae-ho, a fund manager at Seoul Investment Trust & Management.
Along with others slugging it out for market share in the United States, Hyundai faces a potential spiral of price cutting as high inventories at U.S. dealerships push carmakers including General Motors and Ford Motor Co. to woo buyers with discounts and giveaways.
GM and Ford reported big losses in their core automotive businesses in July to September, spending $3,800 to $4,300 per car on sales incentives last month, according to Autodata.
Hyundai played down concerns over the impact of a strong won on its business, saying its divsersified overseas markets provided some hedging.
"European sales are growing, which is giving a natural hedge against the falling dollar," said Kim Duk-joo, head of investor relations.
On the home market, a government stimulus package, including tax cuts, has yet to revive consumer spending from a long slump that Hyundai said would make it difficult to achieve a local sales target of 605,000 units this year.
Hyundai, which controls half the South Korean market, said Thursday that net profit rose to $400 million for July to September, but fell short of analysts' forecast of $428 million.
This compared with revised profits of $269 billion a year ago and $453 million in the second quarter. A 45-day strike last year cost Hyundai $1.15 billion in lost production and dented year-ago profits.
Kia said its third-quarter net profit dipped to $76 million from $77 million a year earlier, while sales jumped by over a third to $3.01 billion.
Hyundai's third-quarter sales rose to $5.81 billion from $4.50 billion a year ago, with local sales down 1.8 percent to 132,383 units but exports, which make up 60 percent of earnings, rising 49 percent to 422,693.
"Despite Q3 earnings coming in below the consensus forecast, Hyundai's fundamentals remain solid, which gives us no reason to reduce our position on Hyundai," said Ki Ho-sam, a fund manager at Daehan Investment Trust Management.
AIMING FOR TOP 5
Investors hope the NF Sonata will do for Hyundai what the Camry did for Toyota Motor Corp. The Camry was Toyota's first car sold in volume globally and helped catapult the Japanese company to No. 2 in the world.
The NF Sonata will compete with the Camry and Honda Motor Co.'s Accord.
Honda on Wednesday reported a 9.2 percent rise in second-quarter operating profit thanks to improved domestic and Asian sales. Toyota is expected to report a 4 percent rise in quarterly profit on Monday.
Hyundai hopes to crank out 5 million cars a year along with Kia Motors to become a global top five carmaker by 2010.
Hyundai's market share in Europe rose to 2.4 percent in August from 1.9 percent a year earlier, and in Russia, Hyundai cars now outsell Toyota.
Hyundai's Getz hatchback has sold briskly in Europe, where demand for cheap, fuel-efficient models is high. But slower sales in China cloud the outlook for exports.