Hyundai Q2 seen up on sales

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Hyundai Motor Co is expected to report a small rise in quarterly profits thanks to higher sales and a weak currency, but South Korea's top auto maker faces a tough second half due to rising oil and slowing domestic demand.

The world's No.5 auto maker, along with its affiliate Kia Motors Corp, is still set to post higher full-year profits on strong overseas demand for smaller cars, analysts said.

"Hyundai is set to post solid earnings for the second quarter on the weaker won and firmer sales, but the quarter is likely to be the peak," said Choi Dae-sik, an auto analyst at CJ Investment & Securities.

"A slowdown in Hyundai's growth will be inevitable in the second half, especially for higher-end models (at home)."

Hyundai controls about half the South Korean market, and Hyundai and Kia derive around 60 percent of revenues from their home market.

Earlier this month, the maker of the Sonata sedan cut its local sales target for 2008 by 6 per cent, saying higher oil prices were denting consumer sentiment in Asia's fourth-largest economy. It has also raised prices to help offset higher prices for raw materials, particularly steel.

Hyundai is expected to post a net profit of 632.2 billion won ($615.7 million) for the second quarter ended on June 30, a Reuters poll of 11 analysts showed. That would be up 3.4 per cent on last year's 611.5 billion won profit and compare with 392.7 billion won in the previous three months.

Its second-quarter operating profit is seen at 694.2 billion won, versus 572.8 billion won a year earlier. Sales are expected to rise 11.5 percent to 8.95 trillion won as its smaller sedans, such as the Elantra, lure more customers amid rising oil prices and helped by a softer won.

The South Korean currency fell 8.6 percent against the dollar on average in the second quarter from a year earlier and dropped 21.2 percent against the euro, South Korean central bank data showed.

A weaker won will help not only Hyundai but also Kia show better sales abroad and report strong earnings for the year, while Japanese rivals such as Toyota Motors Corp are facing a tougher time due to the stronger yen.