Rising won blamed for Hyundai’s profit drop in last quarter of 2012

Article by Anita Panait, on January 25, 2013

Hyundai Motor Co. posted a 5.5-percent year-on-year drop in consolidated net profit for the quarter ended Dec. 31, 2012, to KRW1.893 trillion ($1.8 billion), no thanks to a stronger South Korean won that chipped off the carmaker’s overseas earnings. The South Korean won gained nearly 8 percent against the US dollar in 2012, thereby reducing the value of Hyundai's overseas revenue in local currency terms and hitting its price competitiveness abroad.

Hyundai's competitive edge shifted back to its Japanese rivals, after the yen weakened by 11 percent in 2012. It is quite ironic that Hyundai would post a decline in net profit in the fourth quarter of 2012, since the South Korean carmaker sold a record 1.23 million vehicles in the period. Because of the recent development, Hyundai will now be pressured to roll out new models to entice growth as well as to depend more on the Chinese vehicle market.

Lim Hyung-geun, a fund manager at GS Asset Management, told Reuters that with the weakening yen and rising won, Hyundai's ability to prevail over worsening external factors will be put to the test this year. He added that with no major new cars planned for 2013, Hyundai will have a very challenging year.

Lim noted that Hyundai is not yet a true global leader like Samsung Electronics that could resiliently overcome adverse currency moves. Lee Won-hee, Hyundai's Chief Financial Officer, warned that the gain will continue to rise in the second half of 2013, but assured that its effects will be limited since the carmaker will be moving more production overseas.

Topics: hyundai, profit

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