Q4 Profits increase for Hyundai, expecting to see more

The company, which ranks fifth in global auto sales together with affiliate Kia Motors (000270.KS), made the forecast after reporting that quarterly net profit rose a weaker-than-expected 38 percent from a year earlier to 2.0 trillion won.

 

It said rising competition and global economic uncertainty would mean global auto sales growth this year would more than halve from the pace seen in 2011.

But it was more bullish on Europe, saying it will raise sales to the region by 15.4 percent to 465,000 vehicles this year, driven by Europe-targeted models such as the i30 and i40. The company plans to launch the revamped i30 model, its top-selling model in Europe, in January.

"Price competition could intensify temporarily in Europe, but ultimately, a restructuring of European carmakers could happen...We believe the difficult situation will offer us an opportunity to expand our market share in Europe," said Lee Won-hee, Hyundai's chief financial officer, on an earnings conference call.

Hyundai continued to outperform the European market last year, with its sales rising 11.3 percent. Hyundai and Kia hold a combined 5.1 percent of the European market while Toyota Motor (7203.T) holds 4 percent and Nissan Motor (7201.T) holds 3.4 percent.

Hyundai's European sales accounted for nearly 10 percent of its global sales last year.

Japanese rival Nissan also said recently it expected to increase sales in Europe this year, but the company did not offer specific targets.

Hyundai, the first major Asian automaker reporting fourth-quarter earnings, posted a 2.0 trillion won ($1.8 billion) net profit for October-December, compared with a consensus forecast of 2.26 trillion won from Thomson Reuters I/B/E/S. That is up from 1.45 trillion won in net profit a year earlier and from 1.92 trillion won in the third quarter.

Hyundai's views on Europe are much more upbeat compared with many carmakers. At the Detroit Auto Show earlier this month, industry executives predicted a steady recovery in U.S. car demand, but were far less bullish about the European market, which is forecast to contract about 5 percent for a fifth consecutive annual decline. Hyundai also expects Europe market demand to fall 4.5 percent to 14.4 million vehicles this year.

European car sales fell 1.7 percent last year, hit by the worsening European debt crisis that undermined consumer confidence and may tighten the region's car loan market.

"There is a lot of uncertainty in the global economy In 2012," Lee said, citing the European debt crisis and tensions over Iran as problems facing the auto industry.

He said Hyundai aimed to raise its U.S. sales by 4.5 percent to 675,000 vehicles this year, from 20 percent growth last year, by launching four new models including the Santa Fe SUVs.

He expected Japanese rivals to raise incentives to gain back market share, but Hyundai will maintain or lower its overall incentives in the United States.

The firm's overseas sales rose by 23.2 percent in the fourth quarter from a year earlier, offsetting a 5.8 percent decrease in domestic sales.

Hyundai said it aimed to raise its global sales by 5.7 percent to 4.29 million vehicles this year after its 2011 sales beat its target. This would mark a slowdown for the automaker, which has achieved double-digit sales growth in recent years including its 12.4 percent growth last year.

In contrast, Toyota forecast a 21 percent jump in 2012 sales to a record as it recovers from production losses that arose from Thailand's floods and the Japanese earthquake last year.

"Sales targets for this year look conservative. Hyundai's earnings growth may slow but it will outpace the overall auto industry," said Lim Jong-heon, a fund manager at Alpha Asset Management that owns Hyundai Motor shares.

"Despite the fact that Japanese carmakers are recovering from the worst conditions earlier, they are still under pressure from the strong yen and their recovery is not enough to threaten Hyundai's growth," he said.

Once the object of ridicule for poor-quality cars, Hyundai has become one of the most feared carmakers in the industry, boosting sales and gaining market share even during the global financial crisis.

Competitive pricing, helped by the weak South Korean currency, and the features and styling of its models appeal to value-seeking consumers. But its breakneck volume growth is seen slowing and the carmaker faces the challenge of further boosting brand image and raising prices to offset volume declines.

Shares of Hyundai Motor closed down 2.14 percent in the wider market .KS11 was up 0.25 percent on Thursday. The shares rose 23 percent last year, outperforming the wider market's 11 percent fall.

Courtesy of Reuters