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Hyundai Motor says profit falls for 4th straight quarter, hurt by strikes and strong won

Hyundai Motor says profit falls for 4th straight quarter, hurt by strikes and strong won

Hyundai Motor Co., the world's sixth-largest automaker, said Thursday its fourth-quarter profit declined 22 percent amid strength in the South Korean won and production losses due to strikes.
South Korea's No. 1 automaker earned 537.2 billion won (US$574 million; euro443 million) in the three months ended Dec. 31 compared with the same period the year before, it said in a statement, its fourth straight quarterly net profit decline.
"Mostly, the high won eroded our profitability," said Hyundai spokesman Jake Jang, who added that expensive prices for raw materials like steel and equity losses from its investment in affiliate Kia Motors Corp. also played a role.
Hyundai also suffered partial strikes and work slowdowns during the quarter, when its walkout-prone labor union laid down tools in solidarity with other workers over issues such as opposition to a proposed free trade agreement between South Korea and the United States.
The company said that a total of 11 days of strikes during the quarter cost it 15,414 vehicles in lost production worth about 226.3 billion won (US$242 million; euro186 million) in sales.
The earnings capped a year of turmoil for Hyundai, South Korea's largest automaker, which included the arrest and temporary jailing of Chairman Chung Mong-koo on embezzlement and breach of trust charges. A verdict in his trial is due Feb. 5. Prosecutors have sought a six-year prison sentence.
Sales during the quarter fell 6.6 percent to 7.584 trillion won (US$8.1 billion; euro6.2 billion) from 8.117 trillion won a year earlier. A total of 11 analysts surveyed by Dow Jones Newswires had forecast sales of 7.653 trillion won.
The fourth-quarter profit result, however, came in better than expected. The analysts forecast that the company would post a net profit of 454.8 billion won (US$485 million; euro375 million).
For all of 2006, Hyundai said that net profit fell 35 percent to 1.53 trillion won (US$1.63 billion; euro1.26 billion). Sales fell 0.2 percent to 27.3 trillion won (US$29.2 billion; euro22.5 billion).
"Profit (in 2006) declined because of the exchange rate, oil prices and the worsening management environment," Hyundai said in the statement. "The continuous weakening of the U.S. dollar and euro as well as strikes resulted in decreased sales."
The won rose 8.8 percent against the U.S. dollar in 2006. A stronger currency can hurt South Korean exporters by making their products more expensive in overseas markets and reducing the value of earnings abroad when converted into won.
Jang said that the company incurred equity losses from its stake in Kia amounting to 274 billion won (US$293 million; euro226 million) in 2006 due to a slide in the smaller company's stock price. In 2005 Hyundai had derived a profit of 389 billion won, he said.
Shares in Hyundai, which released earnings before the stock market closed, fell 0.8 percent to finish the session at 66,500 won (US$71; euro55).


Updated : 2021-06-25 15:54 GMT+08:00