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Hyundai Motor Profit Rises 37% After Earthquake Disrupts Toyota, Honda

Hyundai Motor Co. (005380), South Korea’s largest carmaker, had a 37 percent gain in second-quarter profit as the company increased production to fill the void left by disruptions at Japanese rivals.

Net income was 2.3 trillion won ($2.2 billion) in the three months ended June 30, compared with 1.68 trillion won a year earlier, the Seoul-based company said in an e-mailed statement today. This compares with the 2.2 trillion won average of five analyst estimates compiled by Bloomberg.

Sales advanced 19 percent to 20 trillion won, led by fuel- efficient models including Elantra and Accent. Hyundai ramped up production overseas to combat gains in the South Korean won and take advantage of factory shutdowns at Toyota Motor Corp. and Honda Motor Co. after the March earthquake.

“Hyundai’s significant growth in sales volume has been enough to offset the recent strong performance of the won,” Cho Soo Hong, an analyst at Woori Investment & Securities Co. in Seoul, said before the earnings announcement. “The company will face tougher competition in overseas markets as Japanese automakers production is returning to normal.”

Hyundai Motor’s shares fell 1.7 percent to 239,000 won at the 3 p.m. close of trading in Seoul. The shares have gained 38 percent this year, compared with a 5.1 percent gain in the benchmark Kospi Index.

Strong Won

The won has advanced 6.5 percent this year, making it Asia’s second-best performing currency in 2011. Hyundai Chief Financial Officer Won-Hee Lee today said the strong won is a concern. A stronger won hurts South Korea’s exporters because it cuts the value of repatriated earnings.

Hyundai Motor’s second-quarter sales volume rose 13 percent to 1.04 million units, according to the company’s statement today. Domestic sales gained 16 percent and overseas sales rose 12 percent.

The carmaker will introduce new models in the second half of this year to compete with Toyota’s Camry sedan, Lee said.

Hyundai Motor has no plans to increase incentives in the U.S. and aims to increase premium model sales in the market, he said.

In South Korea, Lee expects competition will heighten from imported models from the free-trade agreement with the European Union. The carmaker has order backlog in all export markets, Lee said.

China, Europe

In China, the carmaker sees demand for mid-sized sedans and sport-utility vehicles rising in the world’s biggest auto market, Lee said.

Vehicle sales at the company’s plant in Czech Republic increased by 30 percent, and by 24 percent at its factory in Turkey, compared with a year earlier, according to company data.

Hyundai’s plant in Russia, which opened in September 2010, produced more than 10,000 units each month during the second quarter. The company plans to increase annual output of Accent models, known as Solaris in Russia, at the Russian plant to 200,000 units, from 150,000, it said in an e-mailed statement on July 8.

Operating profit, or sales minus the cost of goods and administrative expenses, rose 22 percent to 2.1 trillion won in the second quarter from 1.7 trillion won, the carmaker said in today’s e-mailed statement.

Toyota’s global production dropped 9.2 percent in June while domestic output slumped 16 percent as it worked to restart factories after the nation’s record earthquake and tsunami caused shortages of parts and electricity. Honda said global production plunged almost 45 percent in June.

To contact the reporter on this story: Rose Kim in Seoul at rkim69@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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