Hyundai Motor Co., South Korea's top automaker, announced Monday that net profit tumbled 47.1 percent in the third quarter thanks to a monthlong strike and a surging local currency.
Its affiliate Kia Motors Corp. posted a net loss for the quarter due to the same reasons, marking the first quarterly loss since 1999 when it was acquired by Hyundai.
Analysts said the results illustrated how Hyundai and Kia, which are ranked together as the world's No. 6 automaker, are vulnerable to currency fluctuations and labor unrest.
"The foreign exchange rate is more burdensome than performance," said Shinyoung Securities senior analyst Cho Yong-joon. "Hyundai Motor's share price will be shaped by a move of the won-dollar exchange rate." A 5.7 percent rally in the won in the three months ending September significantly eroded profits at Hyundai and Kia when proceeds from overseas sales were converted into won.
"Hyundai and Kia stocks may fall further if the won continues to stengthen," said Hyundai Securities analyst Song Sang-hoon.
On June 26, Hyundai's union began a partial strike that lasted for a month, costing the automaker US$1 billion in lost production.
During the quarter, a six-week partial strike at Kia caused 730 billion won ($773 million) in lost production.
Aside from the two main road blocks, the two automakers are struggling with higher oil prices and strong costs for raw materials such as steel and rubber. Shares of Hyundai fell 1.45 percent to close at 75,000 won, while Kia stock gained 0.35 percent to 14,150 won.
For the July-September period, Hyundai reported net profit of 283 billion won, compared with a profit of 535 billion won a year earlier. The result was far worse than the 402 billion won profit forecast by FnGuide Inc., a financial information service provider.
Sales fell 4.3 percent to 5.88 trillion won, and operating profit slipped 31.6 percent to 183 billion won.
For the quarter, the automaker's net profit margin plummetted to 4.8 percent, compared with 8.7 percent a year ago, according to the automaker's statement.
Meanwhile, Kia posted a net loss of 43.9 billion won for the quarter, compared with a profit of 75.9 billion won a year earlier.
The result marked a sharp contrast from a profit of 54.9 billion won predicted by FnGuide.
During the three-month period, Kia's operating loss widened to 87.3 billion won from a loss of 21 billion won a year ago. Sales rose 8.3 percent to 3.5 trillion won.
Early this year, Hyundai and Kia were mired in a slush fund scandal involving Chairman Chung Mong-koo. Chung, 68, was arrested in April on charges of embezzling hundreds of billions of won in company funds and bribing politicians for business favors.
Chung, who was released on bail after two months of detention, is now on trial.
The annual labor strife and Chung's opaque management style are considered major obstacles to the automaker's target of becoming one of the world's top five automakers by 2010, analysts say.
Seoul, Oct. 30 (Yonhap News)
Hyundai Motor's profit nearly halves on strike, surging won |
