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October 28, 2004

SOUTH KOREA: Exports again boost profits at Hyundai and Kia

Sales and operating profits at Hyundai Motor and affiliate Kia Motors rose sharply in the third quarter, again powered by surging exports making up for slow home market demand.

By bcusack

Sales and operating profits at Hyundai Motor and affiliate Kia Motors rose sharply in the third quarter, again powered by surging exports making up for slow home market demand.

According to Dow Jones Newswires, Hyundai said its third-quarter net profit rose nearly 50% to 450 billion won ($US400.2 million), from KRW302 billion a year earlier, when results were dragged down by a lengthy strike by factory workers. Hyundai’s operating profit rose to KRW464 billion, up 84% from KRW252 billion in the year-ago period.

Net profit at Kia, in which Hyundai owns a controlling stake, fell 2% year on year to KRW85 billion in the July-September period, from KRW86.7 billion a year ago, when profits were boosted by a tax adjustment. The company reportedly said that operating profit more than doubled to KRW120.7 billion from KRW58.1 billion.

Hyundai “is on the verge of becoming a global player,” Zayong Koo, an analyst at Lehman Brothers in Seoul, told Dow Jones Newswires. “Hyundai could be the next Samsung Electronics of Korea.” Koo added that Hyundai’s branding and cost-effective manufacturing are allowing the carmaker to start catching up with its bigger Japanese rivals, Toyota Motor and Honda Motor.

Sales at Hyundai climbed 30% to KRW6.5 trillion from KRW5 trillion in last year’s third quarter, the report noted. Hyundai said that a strike, which lasted 25 days in last years quarter, cut sales in that period by KRW1.3 trillion. A strike in this years third quarter lasted just five days and dented sales by about KRW260 billion. Hyundai’s third-quarter sales growth was driven by a 50% increase in exports.

“Exports will continue to serve as a growth engine for Hyundai, which is faced with sluggish domestic consumption and increasing competition from its rivals at home,” Koo told Dow Jones.

Kia, which also relies heavily on exports for growth reported that overseas sales rose 51.2% to KRW16.07 trillion in the third quarter from the same period last year, while domestic sales fell 34.6% over the same period. Overall sales were up 36.3% to KRW3.39 trillion from KRW2.48 trillion a year earlier.

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