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Hyundai Motor has weak first quarter overseas

Hyundai Motor posted its worst operating profit in four years, mainly due to a strong won, which hurt it in Europe and newly industrialized nations.

The nation’s leading automaker announced Thursday that sales in the first quarter were 20.9 trillion won ($19.3 billion) and operating profit was 1.58 trillion won. Sales dropped 3.3 percent from a year ago and year-on-year operating profit dropped by 18.1 percent.

The operating profit was far below the industry’s expectation of 1.66 trillion won and the lowest since the fourth quarter of 2010, when the company earned 1.23 trillion won.

Net profit also dropped 2.3 percent from a year ago to 1.93 trillion won.

“The Korean won was slightly weak against the U.S. dollar, but was too strong against the Euro and currencies in the newly industrialized nations and it impacted our overall sales in the global market,” said Lee Won-hee, chief financial officer of Hyundai Motor.

The company sold a total of 1.18 million cars - 154,802 units in the domestic and 1.02 million units in the foreign markets - a 3.6 percent drop from a year ago.

“As the currency value for the euro and ruble crashed rapidly, the operation rate for the plants related to the markets has decreased,” said Lee, the financial chief. “And consumer sentiment in those regions deteriorated, too.”

Russia was impacted most by an unstable foreign exchange rate and sales there dropped by 41.2 percent from a year ago to account for only 366 billion won.

“We saw the ruble and [Brazil’s] real start recovering slowly from the late first quarter and we expect them to be stabilized in the third,” said Lee.

The company said its performance might not improve much in the second quarter. It said that strong won in Europe and industrialized nations including Brazil and Russia might continue, forcing them to lose price competitiveness against other global automakers including Japanese manufactures such as Toyota and Honda, which have been enjoying a weak yen.

The company said it will expand its investments in developing and introducing new models and improving product quality.

“In order to secure our competitiveness in the global market, we will continue to provide appropriate selling and marketing strategies,” Hyundai said. “For the fast-growing SUV market for instance, we have big hopes for the new Tucson SUV, which we will start selling in the Northern American market in May and in Europe in July.”

The company added that the sales goal for the new Tucson for this year is 280,000 units globally.

Regarding a rumor that the company may build a second plant in the United States with output of 300,000 units a year, Lee said nothing has been decided although the company recognizes growing demand there. U.S. car demand is expected to rise from this year’s 16.8 million to 17.5 million units in 2017, according to the company.

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]