Hyundai Motor’s first quarter profit is expected to drop by almost half, according to a poll of Korean analysts, though affiliate Kia Motors is forecast to return to a net profit thanks to a weaker won and higher domestic sales boosted by new model launches.
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Hyundai is expected to post a KRW205bn (US$152m) net profit compared with KRW392.7bn a year ago and KRW243.5bn in the fourth quarter of last year, according to a Reuters poll of 11 analysts.
“First-quarter earnings are likely to disappoint, but profits will still look great compared with competitors’ massive losses,” Meritz Securities autos analyst Nam Kyung-moon told the news agency. “If the won and the yen remain around current levels, Hyundai and Kia will be able to maintain a level of competitiveness Japanese car makers couldn’t even dream of.”
The report said Hyundai and affilate Kia, together the world’s fifth largest automaker, were expected to gain in future months from weakness in the local currency and government steps to boost domestic car sales, but neither would be immune to the industry’s worst-ever downturn.
According to Reuters, Hyundai will post a Q1 operating profit of KRW206.4bn, less than half the KRW529.1bn booked in 2008. Quarterly sales are seen falling more than 22% to KRW6.38 trillion.
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By GlobalDataReuters noted that the won dropped over 30% year on year against the US dollar and almost 40% against the yen in the first quarter, boosting South Korean carmakers’ price competitiveness overseas against Japanese rivals such as Toyota.
The won’s weakness probably allowed Kia to post a 38.8bn won net profit in the quarter from a net loss of 24.8bn won a year ago, according to the poll.
Government support measures are likely to help Hyundai and Kia remain profitable for the rest of the year, analysts told the news agency. The South Korean government plans to lower purchasing and registration taxes by 70% in May-December for customers replacing old cars with new ones.
Hyundai is expected to post flat full-year net profit of 1.42 trillion won, in contrast to major rivals’ big forecast losses.
Recent won recovery, however, darkens the outlook for the South Korean carmakers, analysts said. “With the credit crunch easing, the won will inevitably rise, and the yen will fall. That will allow Japanese makers to aggressively attack Hyundai and Kia,” HI Investment & Securities analyst Choi Dae-sik told Reuters.
