SEOUL – Hyundai Motor Co <005380.KS> posted a surprise quarterly profit decline after a stronger local currency and the cost of compensating drivers in North America for overstated fuel-economy claims dented car sales.
The Korean won strengthened almost 8 percent against the dollar last year, its biggest gain since 2009, reducing the value of Hyundai Motor's overseas revenue in local currency terms and hurting the carmaker's price competitiveness abroad. To make matters worse, the yen eased by 11 percent, handing Hyundai's competitive edge back to its Japanese rivals.
Hyundai, ranked fifth in global sales with affiliate Kia Motors <000270.KS>, posted a 1.89 trillion won ($1.77 billion) net profit for October-December, missing a consensus forecast of 2.15 trillion won in a Reuters poll of 15 analysts.
The profit decline, down 6 percent from 2 trillion won a year earlier, was the first since Hyundai Motor switched accounting rules in 2011.
Hyundai's fourth-quarter earnings were also hit after the company set aside funds to cover the cost of compensating customers for overstated fuel-economy claims on some cars sold recently in the United States and Canada. Hyundai and affiliate Kia Motors <000270.KS> said they would help drivers pay for the additional fuel costs. Analysts projected provisions of about 300 billion won to 400 billion won.
The worse-than-expected earnings results came despite record car sales in the quarter.
Hyundai, which has enjoyed strong sales growth in recent years by offering stylish, yet affordable models such as Sonata and Elantra, sold 1.23 million vehicles in the fourth quarter, up 11 percent from a year earlier.
The automaker, led by founding family member Chung Mong-koo, also boosted sales at its new China plant as Japanese rivals reeled from anti-Japanese sentiment. Hyundai has outperformed the shrinking Europe market and increased U.S. gains, albeit at a slower pace.
Shares in Hyundai Motor extended their losses, down 3.7 percent after the results, versus the wider market's <.KS11> 0.7 percent fall. ($1 = 1066.2000 Korean won)
(Reporting by Hyunjoo Jin; Editing by Ryan Woo)