April 23, 2015 / 5:30 AM / 4 years ago

UPDATE 2-Hyundai may boost SUV capacity in US, China after profit dips

* Q1 net profit 1.9 trln won vs consensus 1.7 trln won

* Operating profit 1.59 trln won, down 18 pct

* Says actively considering adding U.S. capacity

* Says no retreat in Russia, aiming for bigger market share (Adds executive comments, earnings details)

By Hyunjoo Jin

SEOUL, April 23 (Reuters) - South Korea’s Hyundai Motor may boost production of sport utility vehicles in the United States and China after reporting profits fell again, squeezed by the cost of promotions to bolster car sales and unfavourable foreign exchange trends.

Hyundai, which together with affiliate Kia Motors ranks fifth in global sales, said net profit eased 1 percent to 1.91 trillion won ($1.77 billion) in the January-March period from 1.93 trillion won a year earlier. The decline was its fifth quarterly profit drop in a row.

While rivals cash in on the sport utility vehicle (SUV) boom, spurred in part by cheaper fuel, Hyundai has grappled with a lack of production capacity and absence of new models in the segment.

The firm said it expects earnings to improve in the current quarter, fuelled by overseas rollouts of the latest version of its Tucson SUV.

“We were not able to cope with the market demand because of SUV capacity constraints, which have impacted our earnings,” President Lee Won-hee said on a conference call.

Hyundai is “actively” considering boosting production capacity in the United States, as well as China, to keep up with market growth, Lee said.

He said the company is also “cautiously” considering entering the pick-up truck market, a segment dominated by U.S and Japanese rivals.

Hyundai and Kia raised their 2014 vehicle sales targets late last year even as demand for their mainstay sedans stalled. Hyundai was forced to boost sales promotion incentives by nearly 30 percent in the U.S. market, to an average $2,200 per vehicle, in order to clear inventory during the quarter.

At the same time, the South Korean won strengthened against currencies in Russia, Brazil and Europe, eroding overseas earnings. More than 85 percent of Hyundai’s vehicle sales are booked outside its home turf.

To ease the impact of weaker emerging market currencies, Hyundai has raised vehicle prices in Russia and Brazil, and increased the portion of exports from plants there as well as local parts sourcing.

Lee said Hyundai won’t freeze production in Russia. Instead, the firm’s goal is to boost market share and emerge as a winner when the rouble stabilises.

Lee reaffirmed that Hyundai is actively considering whether to pay an interim dividend as part of efforts to continuously raise dividend payouts.

Its shares ended up 3.2 percent after the earnings announcement, while the broader index was 1.4 percent higher.

$1 = 1,081.9000 won Additional reporting by Sohee Kim; Editing by Stephen Coates, Kenneth Maxwell and Tony Munroe

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