Hyundai Motor Co, South Korea's largest auto maker, said yesterday its net profit tumbled 37 percent in the second quarter from a year ago as the strong South Korean won eroded the company's export revenue.
Hyundai Motor earned 387.29 billion won (US$402 million) in the three months that ended June 30, compared with 613.20 billion won a year before, the company said in a statement.
Sales edged up 0.8 percent to 7 trillion won (US$7.2 billion) as domestic sales slipped 1.8 percent while exports shed 8.7 percent.
The earnings announcement came as the chairman of Hyundai Motor Co, Chung Mong-koo, who is accused of embezzling company money to create a slush fund for bribing political lobbyists, appeared in court yesterday afternoon.
The results were worse than expected. According to a recent poll of 11 analysts surveyed by Dow Jones Newswires, Hyundai Motor was expected to post a net profit of 479.1 billion won.
A stronger local currency reduces the value of overseas earnings when converted back to won, and also hurts demand for Hyundai vehicles abroad where they become more expensive. Exports account for about 60 percent of Hyundai Motor's revenues.
Looking ahead, analysts are expressing some concern about the second half.
Hyundai Motor's labor union staged a monthlong strike from June 28 through to the end of last month, resulting in production losses of 93,882 vehicles worth 1.3 trillion won. The union ended the strike after getting a 5.1 percent rise in basic pay.
The production losses from the strike will inevitably hurt Hyundai's earnings in the second half, analysts said.
Hyundai and its affiliate Kia Motors Corp are aggressively expanding overseas production to meet the goal of becoming the world's six-largest carmaker by 2010.
Meanwhile, Kia, South Korea's second-largest automaker, said yesterday net profit plunged 70 percent in the second quarter from a year ago, also due to the strong Korean won.
Kia Motors earned 45.09 billion won in the quarter ended June 30, down from 148.32 billion won in the same period of last year, the company said in a statement. Sales rose 5 percent to 4.46 trillion won (US$4.6 billion).
Kia's net profit was lower than market expectations. According to research firm Thomson Financial's survey of 13 analysts, Kia was expected to post a net profit of 95 billion won in the second quarter.
During the April-June quarter, Kia sold 293,502 vehicles, down 2.5 percent from a year ago, with local sales dropping 1.9 percent to 67,602 units while exports fell 2.7 percent to 225,900.