WRAPUP 2-Hyundai humbles Japanese rivals with record Q3

Published: 22 Oct 2009 02:12:36 PST

* Hyundai Q3 net 979 bln won vs consensus 616 bln won

* Hyundai Q3 op profit 587 bln won vs consensus 561 bln won

* Honda seen only Japan automaker in H1 profit-report

* Hyundai shares down 0.5 pct after 50 pct gain in Q3 (Adds graphic, annual profit forecasts, background)

SEOUL, Oct 22 - South Korea's Hyundai Motor Co beat forecasts with a record quarterly profit as government incentives fuelled strong global sales of its cheap, fuel-efficient models, setting the bar impossibly high for its struggling Japanese rivals.

Hyundai's tripling in third quarter net profit comes as the global industry struggles to emerge from an unprecedented downturn that drove U.S. giants Chrysler and General Motors to bankruptcy.

Honda Motor Co is the only major Japanese car maker expected to post an operating profit in the fiscal first half, the Nikkei business daily reported on Thursday.

But Hyundai has taken advantage of the turmoil, ramping up its marketing spend to gain market share. It now looks set to challenge Germany's Volkswagen as the most profitable of the world's major carmakers this year.

"These are amazing earnings," said Kazutaka Oshima, CEO at Rakuten Investment Management in Tokyo. "The figures reflect Hyundai's increased share in the Chinese and North American markets, and that's a threat to Japanese automakers."

But Hyundai warned a firmer won, rising oil prices and higher interest rates might hit earnings in the months ahead and its shares were little moved after a 50 percent surge in the third quarter.

"Third-quarter earnings came very strong and the fourth quarter could be also excellent, thanks to the new model launch, but momentum is likely to slow next year," said Choi Jong-Hyeok, a fund manager at Midas Asset Management. "It will be difficult to beat this year."

AIMING HIGH

Hyundai, whose Pony became Korea's first home-grown car in 1975, overtook Ford Motor Co to become the world's fourth-largest automaker by sales in the first half of this year when combined with affiliate Kia Motor Corp.

Hyundai's Genesis sedan and revamped Sonata have proved popular, while earlier schemes offering U.S. buyers the chance to return new cars if they lost their job or to fix in fuel prices for a year also won admirers.

Hyundai posted a net profit of 979.1 billion won ($832 million) in the third quarter, more than thrice the 264.8 billion won of a year ago and beating a 616.3 billion won forecast by 11 analysts in a Reuters poll. Net profits were boosted by equity gains from overseas units, the company said.

Its operating profit of 586.8 billion won beat a forecast for a 561.2 billion won profit and sales rose 34 percent to 8.1 trillion won.

Analysts are likely to raise estimates for Hyundai's full-year profit, centred around $1.7 billion, following the results. Only VW is expected to post a higher annual net profit, at around 1.3 billion euros ($1.95 billion).

For a graphic on Hyundai shares and profits, click http://graphics.thomsonreuters.com/109/KR_HYND1009.gif

WON WORRIES

Hyundai shares closed down 0.5 percent after the results, having far outperformed a 14.5 percent gain in the country's main KOSPI Index in the third quarter.

But both Hyundai and the broader index have lost ground since amid concerns over the impact of a stronger won.

The won is recovering on the back of weakness in the dollar. It gained 8.1 percent versus the dollar in the third quarter and is up 36 percent since early-March.

Hyundai's rivals in Japan are also struggling to cope with a weak dollar and their reliance on the United States and their home market, both of which are struggling with the weakest demand in decades.

World No. 1 Toyota Motor Co is expected to post an equivalent quarterly net loss of around 25 billion yen ($275 million) when it reports early next month.

The Nikkei said Honda, Japan's No.2 behind Toyota, will likely post an operating profit of 60 billion yen ($660 million) for the April-September first half, beating its forecast for a loss on cost-cutting and solid sales of fuel-efficient cars.

Honda's reported first-half figure implies an operating profit of 34.8 billion yen for the July-September quarter, which would be below the average estimate for a 41.7 billion yen profit in a poll of 5 analysts by Thomson Reuters I/B/E/S.

Honda reports next week, with Toyota and No.3 Nissan Motor Co following the week after.

European automakers' third-quarter results have largely met expectations thanks to government incentives boosting sales, but shares have struggled on concerns about next year. ($1=90.92 Yen=1176.4 Won=.6661 Euro)