Seoul: Hyundai Motor Co, South Korea’s top auto maker, on Thursday posted a 38% fall in quarterly net profit, beating market expectations and sending its shares higher, despite strikes and higher costs overseas.
Shares in Hyundai swung right around to be 4.59% up at 52,400 won as of 0520 GMT after falling as much as 7.5%, widely beating the wider market’s 5.5% drop.
However, global automakers such as Hyundai, the world’s No.5 auto maker along with affiliate Kia Motors Corp, are facing shrinking demand as consumers put off major purchases on fears of a recession. Sales of higher-end models are also slowing in Hyundai’s domestic market, analysts said.
“The stock is rebounding on heavy foreign buying but it is hard to say the outlook for auto makers is improving,” said Kim Joong-Hyun, an analyst at Goodmorning Shinhan Securities.
“There could be some pick-up in sales in the fourth quarter as Hyundai makes up lost output during strikes, but that alone doesn’t support optimism amid the sinking world economy.”
Reflecting investor worries about slowing profit growth, shares in Hyundai have fallen 35% so far in the fourth quarter, compared with a 28% drop in the KOSPI.
The maker of the Sonata sedan posted a net profit of 264.8 billion won ($187.5 million) in the third quarter ended on 30 September against a 174.9 billion won forecast by 10 analysts in a Reuters poll.
That compared with a 425.5 billion won profit a year ago and a 546.9 billion won profit in the second quarter of 2008.
The better-than-expected quarterly performance was partly due to the fact that Hyundai did not post any loss from Kia-related derivatives, after posting a 45.3 billion won loss in the year-ago period.
Hyundai reported 104.5 billion won in operating profit during July-September, slightly above a 99.6 billion won profit forecast. The figure was a steep drop from a 356.2 billion won profit a year earlier and a 662.5 won profit in the second quarter of 2008.
Union workers at Hyundai staged 12 partial strikes during wage negotiations in the third quarter, costing the company 44,645 vehicles in lost output, according to company data.
The labour unrest, along with the global financial crisis, slashed sales by 14.5% to 6.05 trillion won.
A weaker won which usually boosts Hyundai’s sales and profits from exports, failed to lift profits in the third quarter and actually weighed on earnings as it magnified the costs of providing warrants on cars sold abroad.
The won lost 13% against the dollar in the third quarter, the biggest quarterly percentage loss since the fourth quarter of 1997.
Hyundai has a market value of about $8 billion. Its shares rose 3.5% in the third quarter, vastly outperforming a 13.5% fall in the benchmark KOSPI.