Hyundai Motor posts first revenue drop in 3 years as stronger won bites

Written by Reuters | Seoul | Updated: Jan 23 2014, 23:50pm hrs
Hyundai sales, HyundaiHyundai's sales slumped as imported rivals like Volkswagen and Mercedes Benz boosted sales after trade deals. Reuters
South Korea's Hyundai Motor posted its first year-on-year fall in quarterly revenue in nearly three years, as the stronger local currency weighed and imported rivals gained ground in the Korean home market.

The South Korean won gained 3 percent against the dollar and surged 27 percent versus the Japanese yen in the fourth quarter from a year earlier, reducing the value of Hyundai Motor's overseas revenue in local currency terms and lifting Japanese rivals' price competitiveness in the United States and other key export markets.

In its lucrative home market of South Korea, Hyundai's sales slumped as imported rivals like Volkswagen and Mercedes Benz boosted sales after trade deals.

"Currency fluctuations - the won's strength coupled with the yen's weakness - weighed on our earnings," Hyundai said in a statement.

Hyundai posted a revenue of 21.94 trillion Korean won ($20.56 billion) in the October to December period, a 3 percent fall from a year earlier. This marked its first year-on-year fall since at least 2011 when new accounting methods were adopted.

Its global shipments rose 0.4 percent to 1.23 million vehicles in the fourth quarter.

Net profit jumped 15 percent to 2.06 trillion won, but missed a consensus forecast of 2.23 trillion. Its profit a year ago was hurt by provisions to cover the cost of compensating customers for overstated fuel-economy claims on some cars sold in the United States and Canada.

Hyundai's domestic sales slumped 13 percent in the fourth quarter from a year earlier.

South Korea is the third biggest market for Hyundai, after China and the United States, but a lucrative revenue source as the automaker sells more large-sized, higher-margin cars than it does in the bigger U.S. market. But imported models have chipped away at Hyundai's domestic dominance, especially in the mid- and large-sized cars, by offering more fuel-efficient, affordable models.

Hyundai's China growth slowed to about 4 percent in the fourth quarter, as Japanese rivals strongly rebounded from a sales slump after tensions eased in a territorial row between Japan and China.

But for the whole year, its China sales surged 21 percent, driven by its new plant which went into operations in 2012. Hyundai plans to maintain its China momentum this year, having already added a capacity at its Chinese factory.

Last year, Hyundai showed lackluster performance in the U.S. and European markets where it once outperformed. Hyundai's U.S. sales rose 3 percent and Europe sales slumped 8.8 percent.

Hyundai's U.S. chief expected its market share to increase slightly to 4.7 percent this year from 4.6 percent in 2013, propelled by new models such as the revamped Sonata sedan and fewer capacity constraints.

In Europe, Hyundai is pinning hopes on the revamped version of the i10 small car, which was released late last year.

Shares in Hyundai Motor trimmed losses, down 0.6 percent after the results, versus the wider market's 0.9 percent drop.