SEOUL -- Hyundai Motor Co.'s second-quarter earnings will top those in the first three months despite a stronger won currency and high steel prices, the chief executive of South Korea's top carmaker said on Friday.
But in an interview with Reuters on the sidelines of a business conference, Kim Dong-jin sought to temper expectations for a quick resurgence of demand, saying he did not view a rise in local sales last month as a sign of a strong turnaround in South Korea's sluggish car market.
"We still have a very difficult business environment -- the won's strength and weak local consumption," said Kim, who is also vice chairman of the Hyundai Motor Group.
"But earnings in the second quarter are better than in the first," he said, without providing further details. The company is scheduled to post second quarter earnings on July 28.
Hyundai Motor posted a surprise 14 percent jump in first quarter net profit on better-than-expected contributions from its Chinese and Indian operations. But its operating profit tumbled by almost a third.
The won gained 15.3 percent on average versus the dollar in the year through the second quarter. But the local unit has weakened about 4 percent over the last 10 days, as the prospect of higher U.S. interest rates boosted the dollar.
Analysts were largely upbeat about Hyundai's earnings prospects.
"Above-average growth in local sales probably helped lift Hyundai's second-quarter earnings along with several price hikes on models," said Suh Sung-moon, an analyst at Dongsuh Securities.
"We are optimistic about the second half with the won turning lower, and there's enough replacement demand for autos now after years of drivers stifling their buying appetite."
The chief executive sought to contain market optimism about a quick upturn in local auto sales in the second half, saying the consumer base was still fragile.
"There's an explosive demand for high-end sedans such as the Grandeur. But looking at other segments of the local car market, sales remain stagnant. It had been quite bad till May," Kim said.
Even so, Hyundai said on Thursday it aimed to sell 320,000 vehicles in the domestic market in the second half, up 15 percent from a year ago.
Affiliate Kia Motors Corp. said on Friday it had cut its local sales target for 2005 by 9.7 percent to 280,000 units. But strong exports to Europe and elsewhere enabled it to keep this year's target for total sales at 1.42 million units.
Offering tentative signs of a long-awaited recovery in domestic consumer demand, local sales by the country's five automakers rose 9.8 percent from a year ago to 100,501 vehicles in June, helped by a flood of new models.
Hyundai Motor, which aims to be one of the world's top six automakers by 2010 along with Kia, recorded an 18 percent jump in June sales from a year ago.
Exports jumped 21 percent to 181,477 units, while local sales rose 10.2 percent to 51,038 units.
Data from an industry association showed South Korea's car exports were expected to hit a record high in 2005, while local sales were seen still stagnant due to tepid domestic consumption.
After years of heavy spending to improve quality and image, Hyundai's exports are racing and now account for more than 70 percent of total sales.
One hurdle that may hinder Hyundai's global progress, highlighted by the May launch of its first U.S. plant in Alabama, is a 42,000-member union, which is holding wage negotiations with management.
The union has demanded an 8.48 percent rise in wages, extension of the retirement age by two years and bonus payouts worth 30 percent of the firm's profits.