Hyundai’s Q2 profit takes a hit as costs rise

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Hyundai’s Q2 profit takes a hit as costs rise

Hyundai Motor, the country’s biggest carmaker by sales, said Thursday its second-quarter net profit fell 11 percent as a strong won and increased fixed costs cut into its bottom line.

Net profit for the April-June period fell to 810.7 billion won ($724 million) from 913.6 billion won a year earlier, the company said in a statement.

“The won’s strength against the U.S. dollar and reduced production at Hyundai’s U.S. plant, which was designed to stabilize its vehicle inventory there, ate away the company’s second-quarter profitability,” the statement said.

The dollar fell to an average of 1,078.57 won in the second quarter from 1,129.43 won a year earlier, according to data from the Bank of Korea.

The net result was also weighed down by weak sales in the carmaker’s two major markets, the United States and China, the statement said.

On Thursday, Hyundai Motor ended 0.38 percent lower at 130,000 won, underperforming the broader Kospi’s 0.71 percent gain.

Looking ahead, the maker of the Sonata sedan and the Santa Fe SUV expressed concerns that the spread of protectionism in major trading partners, such as the United States, and an escalating trade dispute between the United States and China could become sources of concern in the second half.

The U.S. government has recently proposed a 25 percent tariff on imported vehicles, citing national security reasons. It will deal a heavy blow to Korean carmakers, if the move takes effect.

“As it is hard to predict global market conditions in the latter half, the company will make all-out efforts to boost sales by launching the Santa Fe SUV in the U.S. market this summer,” a company official said by phone.

Hyundai’s late response to customers’ growing appetite for SUVs has made its sedan-focused lineup less attractive in global markets.

Operating profit plunged 29 percent to 950.8 billion won in the second quarter from 1.345 trillion won a year ago. Sales were up 1.7 percent to 24.7 trillion won from 24.3 trillion won during the same period, it said.

In the January-June period, net profit slumped 34 percent to 1.54 trillion won from 2.32 trillion won in the year-ago period. Operating income declined 37 percent on-year to 1.63 trillion won in the first six months from 2.6 trillion won. Sales fell 1.1 percent to 47.25 trillion won from 47.67 trillion won.

In the first half, Hyundai’s vehicle sales remained weak in its two biggest markets. Sales in the United States and China fell 3.3 percent and 3.4 percent on-year to 335,000 vehicles and 349,000 units, respectively.

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