Hyundai Profit Increases Nearly Fourfold

Source: New York Times

Hyundai Motor, the biggest South Korean auto maker, said Thursday that its quarterly profit had almost quadrupled as its small cars proved popular with recession-weary buyers.

Fourth-quarter net profit reached 945.5 billion won, or $819.7 million, considerably more than analysts’ forecasts. That total compared with profit of 243.5 billion won in the fourth quarter of 2008 and profit of 979.1 billion won in the third quarter of 2009. Sales in the October-December quarter grew 9.3 percent from the same period a year earlier, to 9.65 trillion won. Hyundai also posted a record quarterly operating profit of 837.2 billion won, up 44 percent from a year earlier.

Hyundai is expected to see healthy sales growth this year as economic recovery and new models bolster demand, analysts said, though a stronger won and fewer government incentives for car buyers are potential risks.

Hyundai’s robust earnings were reported as shares in Toyota Motor, the world’s largest auto maker, fell sharply because of concerns about its image and profits after it halted sales of several top models in the United States to fix an accelerator fault.

“Hyundai still has a lot of momentum, particularly compared with Toyota,” said Mitsuru Kurokawa, an analyst at IHS Global Insight in Tokyo. “They’ve got a lot going for them: a broad compact-car lineup, attractive prices for the quality they offer and clever marketing.”

With its affiliate, Kia Motors, Hyundai is the world’s No. 4 automaker, behind Toyota, General Motors and Volkswagen. Hyundai was a big winner last year, which brought a shift to smaller cars and government incentives worldwide for car buyers. Popular low-cost models and savvy marketing helped it grab market share in the United States and in China, now the world’s biggest auto market, where its Elantra is the best-selling foreign car.

The expected rise in demand for Hyundai’s cars because of its improving brand image and quality is likely to offset the pressure on export earnings from a stronger won, an end to tax breaks for car buyers in Korea and trimmed tax breaks in China.

“There’s no doubt Hyundai, to some degree, benefited from a weaker won, and if that trend changes, it may affect Hyundai negatively,” said Chang In-Whan, chief executive at KTB Asset Management in Seoul. “However, I think Hyundai Motor is safe till the won-U.S. dollar rate is 1,050 won.”

The won has surged 35 percent against the dollar since March and last traded at 1,150 against the U.S. currency.

Shares in Hyundai rose 4.1 percent to 113,500 won after the results, beating the broader market.

Hyundai said it aimed to increase sales this year by 11 percent to 3.46 million cars, trucks and buses. Later this year, Hyundai plans to roll out the new Accent and a revampedElantra, which competes against the Corolla, made by Toyota, and the Civic, by Honda Motor.

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