South Korea's top automaker Hyundai Motor said Thursday that its operating profit fall in the second quarter due to weak domestic demand and supply disruption at local plants.
Operating profit declined 5.2 percent from a year earlier to 2. 4 trillion won (2.15 billion U.S. dollars) in the three months ending June 30, the company said in a statement.
Revenue increased 5.7 percent on-year to 23.18 trillion won in the second quarter, but net income slid 1 percent to 2.52 trillion won over the same period.
For the first six month of this year, the automaker sold a total of 2,390,919 vehicles globally, up 9.5 percent from the same period last year.
Auto sales in overseas markets increased 11.4 percent on-year in the first half, but domestic sales slid 0.8 percent due to persistent weakness of consumer sentiment and solid demand for foreign luxury cars caused by lower import tariffs following free trade deals with Europe and the United States.
Refusal of union laborers to weekend extra work caused supply disruption in local factories, contributing to lower operating profit. Provisioning for product recalls also raised costs.
Hyundai said earlier that it would recall around 110,000 vehicles in Seoul and some 1.1 million cars in the U.S. due to electronic defects that can prevent brake lights from illuminating.
During the January-June period, the company's revenue increased 5.8 percent from a year earlier to 44.55 trillion won, but operating profit declined 7.7 percent to 4.28 trillion won. Net profit retreated 7.8 percent to 4.61 trillion won. "Fragile domestic sales and supply disruption caused by lack of weekend overtime work affected the first-half earnings results, but brisk overseas sales of cars minimized the negative effect," said a Hyundai official.
However, the devaluation of the Japanese yen continued to dim outlook for the second-half earnings of Hyundai, which is fiercely competing with Japanese rivals in overseas markets.
China and the U.S., two major destinations for global car sales, were feared to face weak demand for automobiles, while Europe was expected to face minus growth this year.
The Hyundai official said uncertainties were escalating amid the possibility for an early exit of U.S. quantitative easing, noting that the expected prolongation of China's low growth trend remained as risk factors.
Shares in Hyundai Motor closed at 224,500 won, up 0.45 percent from Wednesday's close. The benchmark KOSPI index slid 0.13 percent.