Hyundai quarterly profit up 13 percent, but long-term growth concerns
South Korea's Hyundai Motor Co <005380.KS> increased its quarterly net profit by 13 percent to $2 billion, as it squeezed overseas capacity to keep sales going despite damaging labor strikes at home, where it produces close to half the vehicles it sells worldwide.
Hyundai, which with affiliate Kia Motors <000270.KS> is the world's fifth-biggest car maker, said its total shipments rose less than 1 percent in July-September - hit by the industrial action that cost the company lost production of more than 82,000 cars worth $1.5 billion.
Hyundai started a new plant in China in June, and added a third shift at a U.S. factory last month, helping ease some of its capacity constraints.
July-September net profit rose to 2.17 trillion won, a touch above the average forecast for 2.13 trillion won, and beating last year's 1.92 trillion won.
"Hyundai will return to record earnings in the current quarter," said Kim Seung-hwan, analyst at Golden Bridge Investment & Securities. "But the problem is next year. Investors are concerned that Hyundai's growth momentum will stall, which is reflected in the recent share price slump."
Hyundai shares have dropped more than 13 percent this month to Wednesday's close, underperforming both the benchmark KOSPI index <.KS11> and Japanese rivals Honda Motor Co Ltd <7267.T>, Nissan Motor Co Ltd <7201.T> and Toyota Motor Corp <7203.T>. After the results on Thursday, Hyundai stock closed up 3.9 percent at 226,500 won each.
"In 2013, Hyundai will be not able to enjoy the double-digit growth in both shipments and profit that it enjoyed since 2009," added Kim. "It has increased sales and market share in the United States and Europe, but whether the growth will be sustainable going forward is in question."
Hyundai on Thursday forecast the global autos market would grow at 3.6 percent next year, slowing from this year's expected 5.1 percent. It predicted the European market would shrink by 8 percent this year.
For this year, Chief Financial Officer Lee Won-hee said Hyundai would beat its global sales target of 4.29 million vehicles.
"With its growth rate moderating on limited capacity and the global economy also weakening, it'll be a challenge for Hyundai to come up with a magic growth formula," said Ohm Joon-o, a fund manager at Kiwoom Asset Management, which holds Hyundai stock.
Analysts also warned of a potential earnings hit from a strengthening Korean won currency, which on Thursday broke through the 1,100 level versus the dollar - its strongest in more than a year.
"If the won appreciates further, Hyundai's earnings will decrease. In addition, due to growing competition in the automotive industry, Hyundai's earnings next year will not be as good as this year," said Jung Sang-jin, a fund manager at Dongbu Asset Management.
While Hyundai has been an outperformer in an industry battered by the global downturn, investors are concerned about the South Korean firm's go-slow strategy on expanding capacity.
Hyundai has not announced plans for a new plant for at least two years, as it focuses on brand and quality rather than aggressively chasing market share - but this has left it short of cars to sell into a recovering U.S. market, where Japanese rivals have muscled back in, as well as in emerging markets such as India. n a summary note this week, Standard & Poor's forecast Hyundai and Kia would lose global market share by 2014.
Hyundai, led by founding family member Chung Mong-koo, bucked an industry slump in Europe and drove up sales in China as Japanese rivals were hit by a popular backlash in the islands dispute. On a conference call following the results, Lee said Hyundai had benefited from the row between China and Japan, and would report higher-than-expected sales in China, the world's biggest market, this year.
($1 = 1103.6500 Korean won)
(Reporting by Hyunjoo Jin and Miyoung Kim; Editing by Ian Geoghegan)