Hyundai profit beats estimates on China, i10 minicar in Europe
SEOUL (Bloomberg) -- Hyundai Motor Co., South Korea's largest carmaker, reported profit that exceeded analysts' estimates as it benefited from anti-Japan protests in China and the i10 minicar helped the company buck the slump in Europe.
Third-quarter net income climbed 13 percent to 2.17 trillion won ($2 billion) in the three months ended Sept. 30, from 1.92 trillion won a year earlier, the Seoul-based company said in an e-mailed statement on Thursday. That beat the 2.05 trillion won average of 27 analyst estimates compiled by Bloomberg. Sales rose 3.6 percent, in line with estimates.
Deliveries in China rose 19 percent, led by the Elantra sedan and Verna small car, after Chinese consumers shunned vehicles made by Toyota Motor Corp. and Nissan Motor Co. as anti-Japan protests flared over a territorial dispute.
Those gains helped Hyundai Motor cushion the fallout from a seven-week labor strike that cost the company an estimated record 1.7 trillion won in lost production.
"The impact of the strikes were especially high," said Lee Sang Hyun, an analyst at NH Investment & Securities Co. "Sales will increase in the fourth quarter as Hyundai tries to make up for the losses of the last three months."
Hyundai Motor on Sept. 4 agreed to raise compensation, on average, by 27.3 million won per person and end overnight shifts, according to the union. That ended Hyundai Motor's first strikes since 2008, which caused 82,088 vehicles in lost output, according to company estimates. The stoppages, which began mid-July, led third-quarter exports from South Korea, home to 46 percent of Hyundai Motor's production capacity, to fall 14 percent, according to the company's Web site. Sales at home shrank 8.3 percent.
While Hyundai Motor has periodically faced disruptions in the past four years because of labor disputes, none were legally sanctioned and they rarely lasted beyond several hours. The last formal strike occurred in 2008, when a 12-day walkout cost the company an estimated 691 billion won, according to the automaker.
The company's clashes with labor stretch back decades. Workers went on strike in 21 of the first 22 years since the union's 1987 formation and the company estimates labor disputes before this year deprived the carmaker of 11.6 trillion won in revenue.
Hyundai Motor is targeting sales to rise 5.7 percent to 4.29 million vehicles this year, including a 15 percent increase in Europe and a 6.8 percent gain in China, the company said on Jan. 26.
Hyundai Motor and affiliate Kia Motors Corp., both headed by Chairman Chung Mong Koo, said last month that combined sales in China will probably exceed their target of 1.25 million units after September deliveries climbed to a record.
Consumers in China avoided buying Japanese-branded vehicles after rioters torched dealerships and smashed cars, violence triggered after Japan's government last month bought a group of islands claimed by both countries.
Sales of Japanese brands tumbled 41 percent in September in the world's biggest car market, the state-backed China Association of Automobile Manufacturers said Oct. 10. Nissan, the biggest Japanese carmaker in China by sales, said on Oct. 19 that it will reimburse owners for damage to lure customers back.
In the United States, the company's second biggest market, third-quarter sales at Hyundai Motor rose 7.7 percent, trailing the industry's 14 percent gain, as deliveries of the Sonata mid-size sedan and Santa-Fe sport utility vehicle fell 3 percent and 29 percent, respectively. The Korean carmaker ceded market share after Japanese carmakers, recovering from last year's earthquake and floods, released new competing models.
Europe market share
In Europe, Hyundai gained market share as it benefited from demand for Tucson sport utility vehicles and the i10 minicar, bucking a slump in demand that's leading auto sales in the region to their fifth consecutive year of declines.
Deliveries of the i10 minicar and Tucson SUV helped Hyundai Motor's deliveries in the region increase 4.9 percent last year. The two models, built mainly in India and the Czech Republic for the European market, were able to skirt the production disruption in South Korea.
Hyundai Motor's sales compares with overall auto registrations in western Europe, which dropped 8.4 percent, according to data compiled by Bloomberg. Still, the automaker's sales are 27 percent below its 2012 sales target in Europe, Hyundai's fourth-largest market.
Hyundai Motor's operating profit in the quarter rose 3.1 percent to 2.06 trillion won, versus the 2.09 trillion won average estimate compiled by Bloomberg. That compares with the 19 percent decline reported on Wednesday by Volkswagen, German's largest automaker, as demand in Europe slumped.Contact Automotive News