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Hyundai Motor Q1 net profit falls on home output drop, currencies

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(Globalpost/GlobalPost)

By Hyunjoo Jin

SEOUL (Reuters) - South Korea's Hyundai Motor Co <005380.KS> posted a 15 percent year-on-year fall in quarterly net profit, broadly in line with market forecasts, as it was hamstrung by weekend production stoppages and unfavourable currency moves.

Hyundai's second quarterly profit drop in a row puts it under more pressure to expand capacity in the United States and elsewhere to cushion the impact of a weaker Japanese yen versus the South Korean won which lessens its price competitiveness, as well as labour troubles at home.

Hyundai Motor, which combined with its affiliate Kia Motors Corp <000270.KS> is the world's fifth-biggest automaker, on Thursday reported a 2.1 trillion won (1.22 billion pounds) net profit for January-March, compared with a consensus forecast of 2 trillion won from Thomson Reuters I/B/E/S.

Group Chairman Chung Mong-koo, whose father founded the Hyundai conglomerate, has slowed capacity expansion in recent years, attempting to avoid repeating Toyota Motor's <7203.T> recall crisis in 2009/10 which was partly a result of its aggressive production growth.

That cautious strategy could backfire in the recovering U.S. market by slowing its sales growth and allowing rivals to bite into its market share, analysts have said.

A media report said on Wednesday Kia Motors may build a new plant in the United States by 2014, but the automaker denied the report.

Fraught relations with workers in South Korea emphasise the need to diversify production base, analysts say.

Hyundai Motor's labour union again refused to work last weekend, the seventh consecutive weekend stoppage, resulting in production losses of 48,000 vehicles worth nearly 1 trillion Korean won.

The union and company have for months locked horns over weekend wages and a new shift system.

Hyundai's earnings have also been eroded by the won's 4.5 percent rise during the first quarter. This has reduced the value of its repatriated foreign earnings, while the weaker yen has aided Hyundai's Japanese rivals.

Hyundai shares, which slumped 17 percent this month, jumped 4.6 percent after the earnings announcement.

"Expectations have been already lowered for Hyundai's earnings because of currencies and weekend production disruption. But today's results met ... expectations, which helped relieve earnings concerns," said Kim Sung-soo, a fund manager at LS Asset Management.

Ford Motor Co <F.N>, the No. 2 U.S. automaker, on Wednesday posted a higher-than-expected first-quarter profit on the strength of its North American unit, as a recovering U.S. housing market helped spur car sales.

(Editing by Daniel Magnowski)

http://www.globalpost.com/dispatch/news/thomson-reuters/130425/hyundai-motor-q1-net-profit-falls-home-output-drop-currencies