* Q1 net profit 1.9 trln won vs 2.19 trln won analyst view
* Profit almost flat on year; lowest in five quarters
* Lacklustre U.S. performance offsets China, Korea sales
(Recasts; adds CFO, analyst comments, closing share price)
By Hyunjoo Jin
SEOUL, April 24 South Korea's Hyundai Motor
has launched a contingency plan to prepare for
further appreciation in the local currency, which pushed
January-March profit to the lowest in five quarters.
Hyundai, the world's fifth-biggest automaker when combined
with affiliate Kia Motors Corp, has seen overseas
earnings shrink when converted into a won hovering near a
six-year high against the U.S. dollar.
Price competitiveness has also suffered, as a firmer won
makes Korea-made exports more expensive for overseas buyers. The
revenue impact of a 1.5 percent first-quarter rise in the won
was exacerbated by buying incentives in the United States.
Net profit was 1.93 trillion won ($1.86 billion) in
January-March, marginally less than a year prior when Hyundai
set aside cash to cover a product recall. The result was also
lower than the 2.19 trillion won estimate of 13 analysts polled
by Thomson Reuters I/B/E/S.
"A contingency plan is under way to prepare for further won
strength, which we expect to persist in the second quarter,"
said Chief Financial Officer Lee Won-hee in a conference call
after Hyundai released earnings on Thursday.
The contingency plan includes cutting vehicle development
costs, Lee said, without elaborating.
Shares of Hyundai closed down 1.2 percent after the results,
compared with a 0.1 percent decline in the wider market.
"Management tried to give a positive signal to investors,
but Hyundai faces a bumpy road ahead. No one can predict how the
currency will move, and competition is getting tougher," said
E*Trade Korea auto analyst Kang Sang-min.
"It also remains to be seen how well new models will be
received by U.S. customers," Kang said.
Hyundai has had a turbulent time in the United States where
a product recall last year was followed by lacklustre sales and
a management shake-up. The automaker has also had fewer new
models in its product line-up in recent years compared with
Ahead of new model launches, Hyundai increased buying
incentives to clear its inventory, Lee said, which contributed
to a 3 percent decline in first-quarter U.S. sales.
"We expect the U.S. launches of the new Genesis (in April)
and Sonata (in June) to help improve our sales and operating
margin from the second quarter," he said.
In China, the world's biggest auto market, Hyundai has been
expanding sales and this month tasked its new local chief with
expediting the construction of a fourth factory.
Adding capacity at its third Chinese plant helped raise
sales in the country by 9 percent in the first quarter, though
that was slower than the growth rates of Japan's Toyota Motor
Corp and the U.S.'s Ford Motor Co.
At home in Korea, sales climbed 5 percent with the help of
the luxury, higher-margin Genesis - revamped late in 2013 - as
well as a recovery in production following a labour dispute a
Hyundai will begin annual wage talks as early as May with
the labour union in Korea, where the automaker builds nearly 40
percent of the vehicles it sells globally.
Domestic sales could get a lift in the second quarter from
the introduction late last month of a Sonata redesigned for the
first time in five years.
Hyundai's bread-and-butter model, however, is pitted against
imports such as Volkswagen AG's Passat and Toyota's
Camry which are benefiting from free-trade deals.
($1 = 1037.6000 Korean Won)
(Editing by Christopher Cushing)