Hyundai fails to match analysts' expectations

Hyundai Motor Co, South Korea's largest automaker, reported a less-than-estimated increase in first-quarter profit after a loss from derivatives linked to currency hedging eroded gains from higher car sales.

Net income rose 28 percent to 392.7 billion won ($396 million), the Seoul-based automaker said yesterday. That fell short of the 561.7 billion won median estimate in a Bloomberg News survey of 11 analysts. Sales climbed 22 percent to 8.2 trillion won.

Hyundai shares fell after the carmaker said it had a 138 billion won loss from derivatives in the first quarter from wrong-way bets on the euro. That limited gains from a 17 percent increase in vehicle sales after the introduction of the Genesis, the company's first rear-wheel drive luxury sedan.

"People are selling on the missed expectations, but concerns will be short-lived as Hyundai's global sales are rising in the face of an economic slowdown," said Heo Pil-seok, who oversees the equivalent of $4 billion including Hyundai shares at Midas International Asset Management in Seoul. "It's the performance of the core business that's important."

Hyundai fell 4.1 percent to 79,600 at the close of trading in Seoul.

The company has gained 11 percent this year, compared with the benchmark Kospi index's 5.2 percent drop and Toyota Motor Corp's 15 percent decline in Tokyo.

Tax, warranties

Hyundai more than doubled the amount of money set aside to pay taxes in the first quarter to 121 billion won, it said. The decline in the currency also boosted the cost of provisions made to cover overseas warranty expenses, Park Dong-wook, a director in the automaker's treasury department, said.

The won slipped 5.5 percent against the dollar and 13 percent against the euro in the quarter.

Operating profit, or sales minus the cost of goods sold and administrative expenses, jumped 61 percent to 529.1 billion won from 328.7 billion won.

The weaker won may have boosted Hyundai's operating margin 1.4 percentage points by raising the value of sales made overseas, said Stephen Ahn, an analyst at Woori Investment & Securities Co.

Agencies

(China Daily 04/25/2008 page15)