Hyundai Motor sees profit drop in 4Q

Seoul February 5, 2005; Kim So-hyun writing for the Korean Hearald reported that Hyundai Motor Co., Korea's largest automaker, said it sold 16 percent more vehicles year-on-year during the fourth quarter but its net income saw a 21 percent unexpected drop due to soaring raw material costs and the strong domestic currency.

The October-December net profit dipped to 361.4 billion won ($352.6 million) from 459.3 billion won a year ago, according to the carmaker's annual report yesterday.

The drop caught most analysts off guard.

"The impact of Hyundai's increased overseas marketing costs and high material price wasn't fully grasped," said Samsung Securities analyst Kim Hak-ju. "Auto parts suppliers are the initial victims of materials price hike, so there is usually a few months' lag until it affects the carmakers. However, it turned out that Hyundai shared the burden quicker than expected."

The company also said in a statement to the Korea Stock Exchange that it would spend more than 651 billion won to buy back 11 million common shares and 1 million preferred shares between Feb. 11 and May 6. That's equivalent to about 5 percent of Hyundai Motor's outstanding shares. Despite the earnings shock, Hyundai's share price gained 1.43 percent to 56,900 won at 2 p.m. in Seoul yesterday following the buyback announcement.

Hyundai Motor targets sales to reach a record 28.5 trillion won in 2005.

The carmaker sold 1.67 million units worth 27.5 trillion won last year, earning 1.78 trillion won in net profit.

Domestic sales fell 13 percent to 550,000 units due to sluggish overall demand but Hyundai's market share rose 2.6 percent to 50.3 percent.

Three out of every four cars Hyundai Motor made in 2004 were sold outside Korea. Improved quality helped the company and its Kia Motors Corp. affiliate surpass Japan's Honda Motor Co. in global unit sales last year. The automotive group hopes to be among the world's five biggest carmakers by 2010.

Out of Hyundai's 1.13 million cars exported last year, 419,000 were sold in the United States, a 4.6 percent year-on-year increase due to greater sales of large sedans and sport utility vehicles such as the Santa Fe, the company said.

Sales in Western Europe also climbed 21 percent to 340,000 units, thanks to the popularity of Hyundai's compact models Click and Lavita and aggressive sponsorship of sporting events in the region.

Compared to 2003, Hyundai's sales in China and India jumped 176 percent to 144,000 cars and 43 percent to 210,000 cars, respectively, after it revved up production at its plants in the two countries.

The company also said it had better ratios of debt-to-equity (82.5 percent) and return-on-sales (13.6 percent) compared to last year's 94 percent and 20.7 percent.

Although it is expected that high raw material costs and the won's appreciation against the U.S. dollar will continue to squeeze operations this year, Hyundai Motor said it plans to diversify its markets by increasing the share of production and sales abroad.

Hyundai Motor also reported yesterday a cash dividend per common share of 1,150 won and dividend per preferred share of 1,250 won. Total dividends reached 326.8 billion won, representing a 14.4 percent rise compared to the year before.