Hyundai Q3 earnings accelerate

Saturday, 30 October 2010 07:11 - - {{hitsCtrl.values.hits}}

Seoul (Reuters): Hyundai Motor, the world’s No.5 car maker along with affiliate Kia, sees new models and robust demand in emerging markets fueling strong near-term earnings momentum, after posting a forecast-beating third-quarter profit on market share gains.

While uncertain economic prospects are clouding the outlook for car sales in the United States and Europe, Hyundai was seen outperforming rivals and gaining market share with strength in compact cars and regional diversification.

South Korea’s top automaker is also benefitting from improved quality and brand image while its Japanese rivals such as Toyota are still reeling from a massive series of recalls and a surging yen.

Hyundai will introduce a revamped version of its best selling Elantra compact in the United States and new Accent and Grandeur in Korea this quarter.

“Hyundai, like many other Korean makers, has created a solid structure to manufacture and deliver products at the lowest cost,” said Fujio Ando, Adviser at Chibagin Asset management in Tokyo.

“They also have some of the world’s best-known and hot product designers, while Japanese makers are still using domestic designers. Japan has little chance to win this battle.”

But its earnings growth may slow down next year, as a rising Korean won could hit overseas sales and its limited production expansion plans could put a brake on its efforts to raise output.

“I doubt whether Hyundai will be able to maintain high growth next year, as the won is firming and its rivals are regaining competitiveness. The market environment will get tougher next year,” Chae Hong-guk, a fund manager at Meritz Asset Management, said.

Hyundai posted a higher-than-expected 38 per cent rise in third-quarter net profit as it gained global market share helped by strong sales of new models.

Hyundai, the maker of the Sonata sedan, on Thursday reported a 1.35 trillion won ($1.20 billion) net profit for the quarter ended September, compared with a consensus forecast of 1.07 billion won from Thomson Reuters I/B/E/S. Net profit was down 2.6 per cent from the previous quarter.

Operating profit rose 28 per cent to 751.8 billion won from a year earlier, while sales climbed nine per cent to 8.85 trillion won.

Hyundai said its global market share climbed to 5.5 per cent in the third quarter from 5.1 per cent in the previous quarter.

Some investors said they would accumulate the stock.

“The results have boosted our confidence further,” said Shirlia Chung, Manager of the Shin Kong Asia Equity Fund in Taipei.

“We’d be worried if the won rose sharply over a short period of time. Other than that, we think Hyundai’s prospects continue to look promising.”