Hyundai posted a fall in quarterly profits on Tuesday because of a sixfold jump in spending on R&D, aimed at boosting sales with new models, Reuters reported.

But it is hoping for a profit rebound later this year on brisk sales of its new models, which include the EF Sonanta sedans, particularly in the United States, where it is increasing sales faster than its Japanese rivals, the news agency said.

The European Union is another good bet, Hyundai's chief financial officer Chae Yang-ki reportedly said, with the company taking advantage of the strength of the euro against the won.

"The first quarter was the worst for Hyundai. But the situation seems to be getting better from April," Choi Yong-kyu, a fund manager at KEB Commerz Investment Trust Management, told Reuters.

According to Reuters, Hyundai earned 417.6 billion won ($US350.6 million) for the three months ended March 31, compared with 586.6 billion won a year ago. The profit beat analysts' forecasts of 336.6 billion, because Hyundai provisioned less than expected on warranty costs.

R&D spending in the first quarter jumped to 58.5 billion won from 9.7 billion won a year ago, Reuters said.

Hyundai hopes to sell 1.82 million vehicles this year versus 1.72 million a year ago, with a strong rise seen in exports to North America and also expects operating profit to rise 44% in 2003 from a year ago to 2.3 trillion won and plans 2.6 trillion won in investments, up 73.3%, Reuters said.

Chae told Reuters Hyundai planned to boost European exports "as much as capacity allows," taking advantage of a strong euro.

Separately, Reuters reported that Hyundai affiliate Kia Motors' first-quarter net profit rose 40% from a year earlier due to brisk sales of pricey recreation vehicles.

According to the news agency, Kia said it earned 141.6 billion won ($118.9 million) in net profit in the three months ended March, compared with 98.9 billion won a year ago. Sales were 3.0 trillion won from a revised 2.5 trillion won.