* Q2 net profit slips nearly 7 pct, below consensus
* Won, US discounts offset solid China, domestic sales
* End of US stimulus measures to curb H2 demand growth
(Add executive comments, production plan, sales data)
By Hyunjoo Jin
SEOUL, July 24 South Korea's Hyundai Motor
reported net profit fell the most in five quarters,
hit by the local currency's strength, and said it may make more
vehicles overseas as it braces for a tough second half with the
won still strong.
Hyundai, the world's fifth-biggest automaker combined with
affiliate Kia Motors, on Thursday reported a 2.24
trillion Korean won ($2.18 billion) net profit for the second
quarter, down nearly 7 percent from a year earlier. That was
below a consensus forecast of 2.33 trillion won, according to a
Reuters poll of 16 analysts.
Still, Hyundai's growing overseas output helped cushion the
impact of the rising won, which makes sales outside its home
base less profitable. The company said it will now consider
adding production capacity overseas - a departure from its
previous stance and a move that could help insulate it from the
strength of South Korea's currency.
"We do not have a positive outlook for the exchange rate in
the second half," Chief Financial Officer Lee Won-hee said in a
"We plan to expand capacity continuously in markets where
there is demand," he said, an effective reversal of previous
strategy for Hyundai, which has broadly steered clear of
building new factories over the past couple of years.
The second-quarter profit fall is the biggest since
Hyundai's net profit slumped 16 percent in the first quarter of
last year, squeezed by massive U.S. recalls and labour disputes
in South Korea.
Higher U.S. discounts offered to entice customers also
overshadowed a quarter when vehicle sales in China and at home
remained robust, the automaker said.
International auto market issues cloud the future. Lee said
he expected global auto demand growth to slow in the second half
from the first half because of the phase-out of economic
stimulus measures in the United States. Demand in emerging
markets except for China will decline, while markets in the U.S.
and Europe will improve, he said.
The won's value jumped by 12.9 percent against the dollar in
the second quarter compared with a year before, its biggest
year-on-year climb since the second quarter of 2011. That saps
overseas earnings when converted back into the local currency.
Another factor cutting into profit was growth in financing
packages offered to lure U.S. car buyers. Incentives, soaked up
by Hyundai, hit their highest level in more than four years as
the automaker offered discounts to reduce an inventory of the
aging Sonata sedan ahead of the rollout of the model's new
version, according to Edmunds.com.
"The 2015 Sonatas are just hitting (U.S.) showrooms so we
can expect that incentive spending will be curbed," Edmunds.com
analyst Jeremy Acevedo said in an emailed statement to Reuters
before the earnings were released.
Hyundai's U.S. vehicle sales rose 4 percent in the second
quarter, lagging the wider market's 7 percent growth.
In South Korea, sales grew 8
percent, driven by the redesigned versions of the Genesis and
Sonata sedans, while in China sales climbed 11 percent, helped
by increased production.
Shares in Hyundai Motor ended 1.6 percent higher after the
earnings announcement, versus a flat broader market.
($1 = 1029.1000 Korean Won)
(Additional reporting by Choonsik Yoo and Joyce Lee; Editing by