(Updates shares, adds quote, analyst)
By Cheon Jong-woo
SEOUL, April 24 (Reuters) -Motor Co , South Korea's top auto maker, missed forecasts with a 28 percent rise in first quarter profit as foreign exchange losses and higher raw material costs weighed, sending its shares down over 4 percent.
While a weaker won currency helped boost sales of models such as the Sonata sedan and the Santa Fe sports utility abroad, it also contributed to steeper prices for inputs such as steel and rubber, and led to losses on currency derivatives.
"The (positive) impact of a weaker won should not be exaggerated, as it boosts raw material import costs and as Japanese makers have more overseas factories than," said Kim Jae-woo, an auto analyst at Mirae Asset Securities.
Continued softness in the won, which helps exports, and increased production from new factories in China and India are likely to keep Hyundai sales strong this year.
One of the brighter prospects for sales is seen coming from demand for its more upmarket models such as the new Genesis sedan, especially in the higher-margin domestic market of which Hyundai has half, analysts said.
Hyundai, which with affiliate Kia Motors Corp is the world's No. 6 auto maker by sales volume, posted a first quarter net profit of 392.7 billion won ($395.8 million), missing a 559.2 billion won forecast, the average from 10 analysts in a Reuters poll.
"Earnings came out worse than expected. But they are still solid on their own. It's just that the market expectation had been too ambitious," said Kim Young-ki, a fund manager at SH Asset Management.
Shares in Hyundai rose some 10 percent during the January-March period, easily outperforming a 10 percent fall in the broader market on hopes for strong earnings.
The stock closed down 4.1 percent in a largely flat broader market .
FOREX LOSSES, TAX WEIGH
Hyundai said losses related to currency derivatives used to mitigate foreign debt shot up to 138 billion won from 22 billion won in the year-ago period as the won weakened against major currencies.
It also said first quarter corporate taxes more than doubled to 121 billion won from 57 billion won a year earlier.
For 2008, the car giant is expected to post a 31.6 percent rise in net profit to 2.21 trillion won, according to a poll of 23 brokerages by Reuters Estimates.
Operating profit rose 61 percent to 529.1 billion won but missed a 574.8 billion won forecast on high raw materials costs.
Sales rose 22 percent to 8.2 trillion won, slightly outperforming forecasts, with unit sales up 14 percent.
During the quarter, the won fell 5 percent against the dollar from a year earlier and 5.5 percent compared to the end of December.
That is expected to lift Hyundai's competitiveness against Japanese rivals such asMotors Corp .
WON TO HELP
Hyundai said it was considering sourcing steel from China for auto production in South Korea to keep costs down.
"If Chinese steel is cheap and of good quality, we may consider buying steel from China," Park Dong-wook, a director at Hyundai's treasury division, told reporters and analysts.
Currently, Hyundai buys 92 percent of its steel from local makers and the rest from Japan for domestic production, he said.
Hyundai's stock trades at 9.71 times forecast 2008 earnings, compared to's 9.44 times and Motor Co Ltd's 8.46 times, according to Reuters data. (Editing by Jonathan Thatcher, Ken Wills and Lincoln Feast) ($1=992.2 Won)