Hyundai Motor Q4 profit drops 28 pct, outlook murky

(ATTN: ADDS details in paras 4-5, stock reaction in para 8, executive's remark on
Brazil plan in final three paras)
SEOUL, Jan. 22 (Yonhap) -- Hyundai Motor Co., South Korea's top carmaker, on
Thursday posted a sharply lower-than-expected 28 percent drop in quarterly profit
for the final quarter of 2008, as higher marketing costs took a big bite out of
earnings despite a weak local currency.

Earnings at Hyundai, which sells more than two-thirds of its vehicles overseas,
are expected to fall further this year amid the deepening global economic slump,
analysts say.
"It is unavoidable that Hyundai Motor will see worse profits in the current
quarter, given the global economic recession," said Choi Dae-shik, an analyst at
HI Investment & Securities Co.
Analysts also anticipate that the company's profits will be further squeezed by a
recently launched incentive program that allows U.S. customers experiencing
financial difficulties to return their vehicles free of charge.
Under the program, U.S. buyers of Hyundai vehicles who can't make their payments
due to layoffs, personal bankruptcy or accidental health issues can return their
vehicles within a year of purchase.
Hyundai earned 243.6 billion won (US$176.9 million) in net profit in the fourth
quarter ended Dec. 31, falling far short of the 634.3 billion won forecast in a
poll of 14 analysts by Yonhap Infomax, the financial news arm of Yonhap News
Agency.
The fourth quarter result was also lower than the net profit of 338 billion won
for the same period a year earlier.
Shares of Hyundai closed 2.87 percent lower at 42,250 won on the disappointing
earnings report, contrasting a 1.14 percent rise in the broader market.
Fourth-quarter operating profit, or sales minus the cost of goods sold and
administrative expenses, fell 8.9 percent from a year ago to 581 billion won.
Sales gained 1.1 percent to 8.8 trillion won.
For all of 2008, Hyundai posted a net profit of 1.44 trillion won, a 13.9 percent
shortfall from last year. Full-year sales rose 5.1 percent to 32 trillion won.
"Despite difficult business conditions amid the global economic recession,
Hyundai Motor recorded better earnings than its rivals," said the company's chief
financial officer, Chang Tae-kyung.
Chang said Hyundai aims to increase sales this year on the back of the local
currency's weakness and sales of smaller cars.
While the company hailed its 2008 earnings report, analysts have expressed
concerns about Hyundai's liquidity profile.
On Wednesday, Moody's Investors Service put Hyundai's foreign currency debt
rating on review for a possible downgrade, citing the company's slumping sales
and weakening liquidity position.
"The rating action was driven by concerns over an expected weakening in Hyundai
Motor Group's operating performance in 2009 in conjunction with the accelerating
downtrend in global auto sales," said Chris Park, a senior analyst at Moody's.
"This also reflects the increasing liquidity pressure associated with the turmoil
in credit markets which has been placed on the group," the analyst said.
During the fourth quarter, Hyundai's vehicle sales fell 6.6 percent to 448,221
units. Domestic sales dropped 22.8 percent to 129,841 units and exports rose 2.1
percent to 318,380 units, according to the company.
In a conference call with analysts, Hyundai's Vice President Chung Tae-hwan said
the company "temporarily suspended" its plan to build an assembly factory in
Brazil amid rising inventories of unsold vehicles.
Hyundai was cutting its first-quarter production by as much as 30 percent at its
South Korean plants, which account for about half of its total output, as the
global economic downturn sapped demand for new vehicles worldwide.
(END)