seoul 07 26, 2012, 13:20 IST
South Korean automaker Hyundai Motor <005380.KS> reported its 13th straight quarter of rising profits on Thursday, boosted by record global sales, including double-digit gains in Europe, even as its home market and China proved sluggish.
European sales roared ahead off the back of new product launches, including the i40 sedan and ix35 SUV, as other mass market automakers floundered. Ford Motor
Hyundai Motor, the world's fifth-biggest carmaker along with affiliate Kia Motors <000270.KS>, said April-to-June quarterly sales topping 1.11 million vehicles were a record high and it expected to slightly exceed its global sales target this year.
However, it reduced its expectations for overall global car sales by all manufacturers this year, citing weaker-than-expected demand in Europe and China.
Net profits rose to 2.55 trillion Korean won f or April to June, broadly in line with an average forecast among 14 analysts of 2.52 trillion won. It marked a rise of 10 percent over a year earlier.
Hyundai shares picked up after the results to rise as much as 2.5 percent on the day, before closing up 1.6 percent, outpacing a 0.7 percent rise in the wider market <.KS11>.
Since the second quarter of 2009, Hyundai Motor net profits have risen each quarter compared with the year earlier, as the company led by founding family member Chung Mong-koo, outperformed global peers with stylish, yet affordable cars, helped by a weaker won against the dollar.
EUROPE RISKS
A free trade deal with Europe, which took effect a year ago, also increased the competitiveness of Korean-made vehicles exported to Europe.
But the deal sparked some backlash from European carmakers that suffer from overcapacity and weak demand stemming from Europe's debt crisis. The French government has said it would formally ask Brussels to monitor South Korean car imports with a view to taking trade action.
However, Chief Financial Officer Lee Won-hee said on a conference call it was premature to expect any trade action in France, where Hyundai's market share is less than 4 percent.
"Capable dealers in Europe are asking Hyundai that they want to sell Hyundai cars," Lee said.
Still, some analysts suggested Hyundai needed to be wary.
"I am cautious about Hyundai-bashing in Europe, and possible anti-Korean sentiment there at a time when consumers are facing loss of auto jobs," said Park Sang-won, an analyst at Eugene Investment & Securities.
In contrast, the free trade deal is hurting Hyundai in its home market as premium brands such as BMW
South Korea, Hyundai's second-biggest market after China last year, is a lucrative revenue source that has supported the firm's growth overseas, analysts said.
Despite record global sales, Hyundai's 10 percent profit rise was the smallest quarterly increase in more than three years.
The slowdown underlines the challenges facing the stellar performer - meeting lofty investor expectations after years of dizzying growth.
Indeed, Hyundai shares have fallen about 18 percent since May highs on concerns about the global downturn and labour tensions. Hy undai workers staged their first strike in four years on July 13 over an annual wage deal.
"Hyundai is selling cars all over the world, so it can't avoid a global demand slowdown. Hyundai's models are also ageing, while competitors are launching new models," Kim Young-min, a fund manger at IBK Asset Management, said before the results were announced.
CHINA STUTTERS
Other rivals, such as General Motors
It has lagged rivals in growing its China market in the last couple of years, partly because of capacity constraints in meeting demand.
Hyundai had posted the biggest gains in China market share among top automakers for the past decade. China is now Hyundai's biggest market, accounting for nearly 20 percent of its global sales in 2011.
Hyundai said this week that preliminary figures showed its China sales rose 2 percent in April to June from a year earlier.
In Europe, they jumped 18 percent, more than double its global sales growth pace of 7 percent.
The China new car market grew just 2.9 percent in the first half of 2012 after posting anaemic growth of 2.5 percent in 2011, setting the country up for its slowest back-to-back years of growth since the market took off in the late 1990s.
Many analysts expect the Chinese auto market to pick up in the latter half of this year, but much will depend on the impact of the euro area debt crisis on the global economy.
Hyundai starts production this quarter at a new plant -- its third in China.
(Additional report by Eunhye Shin in SEOUL and Norihiko Shirouzu in BEIJING; Editing by Neil Fullick)
