By Hyunjoo Jin SEOUL (Reuters) - South Korea's Hyundai Motor said its net profit fell the most in five quarters, hit by the local currency's sharp gain versus the dollar, and warned it sees a tough second half as the won stays strong and global demand growth weakens.
Hyundai Motor, the world's fifth-biggest automaker combined with affiliate Kia Motors, on Thursday reported a 2.24 trillion Korean won ($2.18 billion) net profit for the second quarter, down nearly 7 percent from a year earlier. That was lower than a consensus forecast of 2.33 trillion won, according to a Reuters poll of 16 analysts.
Higher U.S. discounts offered to entice customers also overshadowed a quarter when vehicle sales in China and at home remained robust, the automaker said. The fall is the biggest since Hyundai Motor's net profit slumped 16 percent in the first quarter of last year, squeezed by massive U.S. recalls and labor disputes in South Korea.
"We do not have a positive outlook for the exchange rate in the second half," Chief Financial Officer Lee Won-hee said in a conference call after the company released its results.
Lee said Hyundai will seek to cut costs, boost the portion of high-margin premium cars, and increase local parts sourcing to help reduce currency exposure.
Still, international auto market issues cloud the future. Lee said he expected global auto demand growth to slow in the second half from the first half because of the phase-out of economic stimulus measures in the United States. Demand in emerging markets except for China will decline, while markets in the U.S. and Europe will improve, he said.
The won's value jumped by 12.9 percent against the dollar in the second quarter compared with a year before, its biggest year-on-year climb since the second quarter of 2011. That saps overseas earnings when converted back into the local currency.
Another factor cutting into profit was growth in financing packages offered to lure U.S. car buyers. Incentives, soaked up by Hyundai, hit their highest level in more than four years as the automaker offered discounts to reduce an inventory of the aging Sonata sedan ahead of the rollout of the model's new version, according to Edmunds.com.
"The 2015 Sonatas are just hitting (U.S.) showrooms so we can expect that incentive spending will be curbed," Edmunds.com analyst Jeremy Acevedo said in an emailed statement to Reuters before the earnings were released.
Shares in Hyundai Motor ended 1.6 percent higher after the earnings announcement, versus a flat broader market.
($1 = 1029.1000 Korean Won)
(Additional reporting by Choonsik Yoo; Editing by Kenneth Maxwell)