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Hyundai Motor Net Profit Up 38%

October 28, 2010
3 min to read


SEOUL — Hyundai Motor Co. Thursday posted a better-than-expected 38% rise in third quarter net profit and sounded an upbeat note for the current period, saying planned new car launches and higher selling prices will help its performance.


Hyundai is planning to launch several new models in the U.S. over the coming months, starting with the Equus large sedan in November, as it pushes to expand its global market share, which stood at 5.5 percent in the third quarter. Hyundai, together with its 39 percent-owned affiliate Kia Motors Corp., is the world's fifth-largest car maker by sales.

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South Korea's No. 1 car maker by sales posted a net profit of 1.353 trillion South Korean won ($1.2 billion), compared with 979.1 billion a year earlier. The average of estimates in a Dow Jones Newswires poll of 12 analysts was for a net profit of 1.166 trillion won.


"Robust sales in overseas plants in the U.S. and China surged and expanded sales of mainstay products, such as the Sonata and Avante sedans, will continue to bolster profitability" in the fourth quarter, Chief Financial Officer Lee Won-hee said. The Avante also is sold as the Hyundai Elantra.


This year, more than 50 percent of the company's production on average has come from outside Korea. With overseas production now outstripping domestic output, Hyundai will be less vulnerable to foreign-exchange fluctuations, trade conflicts and labor disputes, which analysts say have hit its results from South Korean plants.


Sales at Hyundai's overseas plants increased 20 percent to 483,941 vehicles in the third quarter from 402,801 units a year earlier, and accounted for 54% of total sales, the highest share ever, up from an average of 48 percent in 2009, the company said.


"It really is a significant moment for Hyundai as it is in the process of evolving into a global car maker by churning out more vehicles overseas," said Suh Sung-moon, an analyst at Korea Investment & Securities.

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In another positive sign, Hyundai's Lee said the Sonata's U.S. sales price was higher or similar to Toyota Motor Corp.'s rival Camry sedan in the third quarter, an encouraging sign as sales there remained robust.


Meanwhile, Michael Sohn at Macquarie said that an improving U.S. economy means auto makers can cut back on sales incentives there, which should help Hyundai's earnings and brand value in the world's most important car market.


In addition, Sohn said, with sales growth outstripping capacity expansion, Hyundai will benefit from being able to maintain a low inventory level.


The company said higher utilization rates of plants and an improved product mix propped up its quarterly earnings, despite higher input costs and fewer working days due to a holiday.


The dollar fell 4.5% to an average of 1,185.59 won in the third quarter from 1,240.89 won a year earlier. The stronger won worked as a double-edged sword, driving down profits from overseas sales when converted into the local currency, but also pushing down the amount the company sets aside in dollar-denominated provisions for overseas after-sales services.

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For 2011, the company will set up business plans based on an exchange rate of 1,100 won to the dollar, which hasn't changed from this year when it has also drawn up plans at the same exchange rate, Lee said.

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