Hyundai Net Profits Profit From Exports

SEOUL, Aug 11, 2003; Reuters reported that South Korea's biggest carmaker, Hyundai Motor Co , said quarterly profits rose 86 percent, boosted by exports of luxury sedans and sport utility vehicles to the key U.S. market and to Europe.

Hyundai, 10-percent owned by U.S.-German auto maker DaimlerChrysler AG (XETRA:DCXGn.DE - News), has invested heavily to improve the quality of its cars, launching new models such as the New EF Sonata mid-sized sedan and the Santa Fe sport utility vehicle. A generous warranty policy has also lifted sales.

Profits were expected to continue growing through the second half of 2003 as a recovery in the domestic economy adds to robust exports, particularly to Europe where the strong euro has made Korean imports more competitive.

A near seven-week strike that cost Hyundai $1.2 billion in lost output is not expected to dent profits much as it whittled away inventories and costs fell while workers were unpaid, although analysts are concerned about the longer-term impact of an 8.6 percent pay increase agreed to end the strike and the impact of a stronger won currency against the dollar on exports.

"We don't have very bright expectations for a drastic improvement in the domestic sales climate, but if exports do at least as well as last year then there would be no need for a discount in Hyundai shares", said Chung Doo-sun, a fund manager at CJ Investment Trust Management.

Hyundai Motor reported a net profit of 570.4 billion won ($483 million) for the second quarter ended June 30, compared with a profit of 306.8 billion a year ago, according to Reuters calculations.

The results were above the average analyst forecasts of a 454 billion won net profit.

In the second quarter of last year, Hyundai had to tuck away more than 200 billion won to cover tighter European Union (News - Websites) environmental regulations and over 500 billion won for warranty pledges in the U.S. market.

"There was much less provisioning this time," a Hyundai Motor official said without elaborating.

Sales for the three months ended June 30 were 6.58 trillion won, up six percent from 6.2 trillion won in the same quarter a year ago. Analysts had expected sales of about 6.74 trillion won.

"Even though demand was sluggish in the local market, overseas exports were dramatic due to rising sales of higher-value-added cars like the XG sedan and the Santa Fe sport utility vehicle," said Hyundai Motor spokesman Jake Jang.

The auto maker released only first half figures.

Hyundai shares were up 0.3 percent at 32,700 won at 0222 GMT, outpacing a 1.19 percent fall in the main stock index.

EXPORTS SHINE

The auto maker is betting on exports to drive growth this year in the wake of weak demand at home, where the economy is struggling to emerge from a recession in the first half.

Hyundai saw exports during the first half of this year rise 30 percent from a year ago to 627,728 vehicles.

In contrast, domestic sales fell 11 percent to 342,914 vehicles as South Korea slipped into its first recession in five years due largely to a diplomatic standoff over North Korea's nuclear arms programme and falling domestic consumption on steps to curb household debts.

Exports account for around 60 percent of Hyundai's annual production and earnings, according to the company.

Hyundai controls 42 percent of South Korea's automobile market, while affiliate Kia Motors Corp , the country's second-largest auto maker, accounts for 27 percent.