Seoul: Hyundai Motor Co, South Korea’s top automaker, on Thursday reported a smaller-than-expected 43% fall in quarterly net profit as a weak currency helped cushion it from falling sales and higher marketing costs.
Both Hyundai and its affiliate Kia Motors Corp have gained share in the US market with their lineups of smaller, cheaper vehicle.
But neither is expected to remain completely immune to the industry’s worst-ever downturn, which has driven US auto giants General Motors and Chrysler LLC to the brink of bankruptcy and is dragging Japanese rivals like Toyota Motor Corp into the red.
“Given the severity of the economic slowdown, Hyundai performed relatively well but that’s largely thanks to the windfall gains from a weak won,” said Lee Jong-woo, research head at HMC Investment Securities.
Hyundai sounded a bullish note on the quarters ahead.
“From the second quarter, we expect global governments’ economic stimulus measures and support plans for auto industry to have some positive effect on the industry,” Chung Tae-hwan, Hyundai’s chief financial officer, told reporters and analysts.
South Korea’s government plans to lower purchasing and registration taxes by 70% in May-December to customers who replace their old cars with new ones.
Hyundai, the world’s No.5 car maker along with Kia, posted a net profit of won225 billion ($166.5 million) in the first quarter, beating a won205 billion forecast by 11 analysts in a Reuters poll.
That compared with a won392.7 billion profit a year ago. The strong net result was in part due to equity method gains from Hyundai’s Chinese and US factories.
The maker of the Elantra compact car reported a won153.8 billion operating profit, below a forecast for a won206.4 billion profit. Its overall profit margin dropped to 2.5% in the first quarter from 6.5% in the year-ago quarter as the recession pressured automakers to step up marketing and reduce prices.
Hyundai said its global market share rose to 4.7% in the first quarter, from 4%.
The won dropped over 30% against the dollar and almost 40% versus the yen in January-March from last year, boosting South Korean carmakers’ price competitiveness in overseas markets against Japanese rivals such as Toyota.
Kia, which is due to report on Friday, is expected by analysts to swing to a first-quarter profit, thanks largely to the weaker won.
For all of 2009, Hyundai is expected to report a 4.8% fall in a net profit to won1.38 trillion, according to a poll of 22 brokers by Reuters Estimates. The estimate contrasts with major rivals’ expectations of massive losses for 2009, and reflects efforts by policymakers to spur demand in its higher-margin home market.
Reflecting the company’s resilient outlook, shares in Hyundai rose 40% in January-March, beating the wider market’s 13% gain, but a recent won recovery is clouding the outlook for South Korean carmakers, some analysts said.