Hyundai Motor has reported an 11 percent drop in Q2 profits, with earnings squeezed by higher steel prices and slow domestic sales. But the fall was less than expected. The company earned a net profit of 510 billion won ($430 million) for the second quarter to June, down from 570.9 billion won a year ago but beating analysts’ forecasts.

The company said that strong exports to China and Europe led sales higher and compensated for lagging demand at home, where demand is being depressed by high levels of consumer debt.
Domestic sales are expected to pick up in the second half of the year, but HM’s  outlook is clouded by higher labour costs and wilting demand in China.

“The second-quarter results don’t look too bad. Inventory levels stabilised and Hyundai did relatively well amid weak local sales,” said Song In-ho, a fund manager at Kyobo Investment Trust Management Co, in remarks reported by Reuters.

“The company’s fundamentals remain healthy and I’m not too worried about the second half. Domestic sales will remain weak for a while, but Hyundai sells well in Europe and the United States,” he added in the Reuters report.