By Seonjin Cha, Bloomberg
Seoul: Hyundai Motor Co., South Korea’s biggest automaker, reported an unexpected fifth straight drop in profit as a stronger won compounded a slump in sales of Sonata sedans and Tucson sport-utility vehicles.
Net income fell 10% to 307.4 billion won ($330 million) in the three months ended March 31, the Seoul-based automaker said in a statement today. That was less than the 363.9 billion won. Sales dropped 2.6 % to 6.68 trillion won.
The won has appreciated 7.9 % against the dollar since the start of last year, making Hyundai cars more expensive in the US, the automaker’s largest overseas market. At the same time, Toyota Motor Corp. and Honda Motor Co. have benefited from a weaker yen. Hyundai’s domestic market share has fallen by three percentage points.
“Hyundai Motor’s sales are under huge pressure at home and overseas,” said Lim Chang Gue, who manages about $950 million including Hyundai Motor shares at Samsung Investment Trust Management Co. in Seoul. “I don’t see any good news in terms of sales growth on the horizon.”
Chung Mong Koo, the automaker’s chairman, is also due to appear in court on 22 May, as he appeals a conviction on charges of embezzlement and breach of trust. He was arrested in April last year and spent two months in jail before his original trial.
Hyundai’s overseas sales, which accounted for 56% of revenue, dropped 6.4% in the three months ended March, as the stronger won cut the repatriated value of its exports. Honda, Japan’s second-biggest carmaker, boosted its international earnings 11% to 2.65 trillion yen ($22 billion) in the period, helped by a 2.1 % weaker yen.
Contributions from Hyundai’s overseas plants plunged 86 % to 30 billion won. The company’s plant in Alabama generated 82 % less profit, because of higher tax payments. Its Indian plant’s contribution fell 41 %.
Beijing Hyundai Motor Co., the company’s Chinese carmaking venture, contributed 10.9 billion won, 59 % less than a year earlier. The venture’s sales of Elantra compacts and other models fell 4.1 % to 64,000 in the first quarter, as other carmakers cut their prices.
Shares of Hyundai Motor rose 3.9 % to 61,600 won at the close of trading in Seoul. The stock has fallen 24 % during the past year, while the benchmark Kospi index has risen 8.3 %.
“The shares looks like they have hit rock bottom,” said Chung Sung Yop, an analyst at Daiwa Securities Co. in Seoul. “Still, there’s not much prospect of a recovery.” Chung rates the stock as “hold”
The stock trades at a price-to-earnings ratio of 5.8 %, compared with 6.8 % for GM, the world’s largest automaker, and of 14.8 % for Toyota.
Hyundai’s first-quarter operating profit, or sales minus the cost of goods sold and administrative expenses, declined 13 % to 291.4 billion won.
The automaker raised its vehicle sales 10 % in April, ending a run of four straight declines, it said today in a separate statement. Sales from South Korean plants fell 7.4 % in the first quarter to 387,463 vehicles, as workers staged stoppages because of a pay dispute. Sales from plants in China, India, Turkey and the US rose by 9.3 %.
Hyundai aims to boost sales 14 % this year to 42.3 trillion won, it reiterated today. Output, including overseas plants, may climb 9.4 % to 2.74 million vehicles.
Hyundai’s share of domestic car sales fell to 49 % in the first quarter from 52 % a year earlier. GM Daweoo Auto & Technology Co., the South Korean unit of General Motors Corp., raised its share to 12 % from 9.6 %, according to the Korea Automobile Manufacturers Association.
In the US, Hyundai sold 4.6 % fewer cars last month, led by a 34 % decline in Sonata sales. First-quarter vehicle sales fell 1.7 % as the carmaker cut lower-profit sales to rental companies. Toyota, Japan’s largest automaker, boosted its U.S. unit sales 11 % in period.
Hyundai aims to sell 550,000 vehicles in the U.S. this year and to raise its market share to 3 %, as it introduces Veracruz and Santa Fe sport-utility vehicles, it reiterated today.
“It’s a demanding target,” Park Dong Wook, director of the financial management division, told analysts and reporters in Seoul today.