Hyundai net profit drops almost 7% in second quarter 2014

Article by Christian A., on July 26, 2014

Hyundai Motor posted nearly a 7-percent drop in net profit for the second quarter of 2014 to KRW2.24 trillion ($2.18 billion), no thanks to stronger South Korean won and weakening global demand. While sales in China and South Korea were strong in the period, the carmaker was hurt by higher discounts offered to entice customers in the United States.

Because of the exchange rate situation, the carmaker is not as optimistic on its impact on its results in the second half of 2014, according to Chief Financial Officer Lee Won-hee.

The won appreciated 13 percent against the dollar in the second quarter in 2014, sapping overseas earnings when converted back into the local currency.

According to Lee, Hyundai will try to cut currency exposure by reducing costs, boosting the portion of high-margin premium cars, and increase local parts sourcing.

Helping Hyundai cushion the impact of strong local currency are its overseas production, and is now considering adding further capacity.

Lee remarked that Hyundai is planning to expand capacity continuously in markets where there is demand. Such move would be contrary to a previous strategy that made it stopped building new plants in past years.

According to Lee, global auto demand growth will slow in the second half of 2014 as the economic stimulus measures in the United States start to phase out. He added while demand in emerging markets will drop, sales in the US and Europe will surge. [source: Hyundai]

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