* Q4 net profit down 6 pct to 1.89 trln won vs. consensus of
* Outlook dampened by currency shifts, competition
* Hyundai gains in China as Japanese rivals struggle
By Hyunjoo Jin
SEOUL, Jan 24 Hyundai Motor Co,
ranked fifth in global sales with affiliate Kia Motors
, posted a surprise quarterly profit drop as a
stronger Korean won dented its overseas earnings, sending its
shares falling the most in three weeks.
The won rose almost 8 percent against the dollar last year,
its biggest gain since 2009, cutting the value of Hyundai's
overseas revenue in local currency terms and hurting the
carmaker's price competitiveness abroad. To make matters worse,
the yen eased by 11 percent, handing Hyundai's
competitive edge back to its Japanese rivals.
The profit decline came even as Hyundai Motor sold a record
1.23 million vehicles in the fourth quarter. The company, which
have enjoyed years of strong growth by offering stylish, yet
affordable models such as the Sonata and Elantra, will face
pressure to unroll new models to revive growth and lean even
more on the China market - the sole bright spot on the horizon.
"With the yen seen weakening further, while the won is set
to keep rising, Hyundai's ability to overcome worsening external
factors will be put to the test this year," said Lim Hyung-geun,
a fund manager at GS Asset Management.
"With no major new cars planned this year, it'll be very
challenging year for Hyundai," Lim said, adding that he has
already offloaded some of his Hyundai Motor shares. "It's not
yet a true global leader like Samsung Electronics
which can resiliently overcome adverse currency moves."
Hyundai Motor's Chief Financial Officer Lee Won-hee warned
that the won's gains will accelerate in the second half, but
said their effects will be limited as the company counters the
impact of the strengthening currency by moving more production
The company's profit was also hit after Hyundai set aside
240 billion won ($225.10 million) to cover the cost of
compensating customers for overstated fuel-economy claims on
some cars sold recently in the United States and Canada, Lee
told reporters after the earnings announcement on Thursday.
Hyundai and affiliate Kia said they would help drivers pay
for the additional fuel costs. Analysts projected provisions of
about 300 billion won to 400 billion won.
Shares in Hyundai Motor extended their losses on Thursday
after the disappointing results, ending 4.6 percent lower,
versus the wider market's 0.8 percent fall.
FIRST DROP SINCE 2011
Hyundai posted a 1.89 trillion won ($1.77 billion) net
profit for October-December, missing a consensus forecast of
2.15 trillion won in a Reuters poll of 15 analysts.
The decline, down 6 percent from 2 trillion won a year
earlier, was the first profit fall since Hyundai Motor switched
accounting rules in 2011.
Hyundai aims to increase its U.S. sales by 4.4 percent this
year, while its Europe sales would fall 6.5 percent, CFO Lee
By contrast, its Europe sales grew 10.2 percent last year
while U.S. sales increased 8.9 percent.
Hyundai's China sales are forecast to rise 13.3 percent, Lee
said. That compares with last year's 12 percent growth.
Hyundai, led by founding family member Chung Mong-koo,
boosted sales in China after opening a new plant in the world's
biggest auto market as Japanese rivals reeled from anti-Japanese
"Global economic weakness will continue this year," Lee
said, forecasting a prolonged downturn in the United States and
Europe and slowing growth in China and other emerging markets.
Hyundai aims to increase global sales by 6 percent to 4.66
million vehicles this year, boosted by new plants in China and
That volume increase would be the slowest since 2007 but
would still surpass the overall industry's projected 3 percent
rise and rival Toyota Motor Corp's 2.2 percent growth