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Hyundai Motor Post Fourth-Quarter Profit Drop on Weak Won, Sales

Hyundai Motor, South Korea's top automaker, reported a surprise 8.6% drop in quarterly operating profit on Thursday, hit by a stronger won and weaker sales after partial strikes.

Hyundai posted an operating profit of 307 billion won in October-December of 2006, well below a Reuters forecast for a 386.7 billion won profit. The company reported 336 billion won in operating profit a year ago and 183 billion in the previous quarter.

Hyundai's earnings are expected to pick up this year, helped by lower raw material costs, rises in car prices and higher sales abroad. The won is seen rising further, but not at last year's breakneck pace. However, possible labor disputes could put a brake on Hyundai as they could jeopardize the company's target of a 9.4% rise in 2007 sales to 2.735 million units.

The he world's No.6 automaker along with affiliate Kia Motors, aims to boost 2007 sales by 14% to 31.13 trillion won (US$33.27 billion), increasing sales from local plants by 6.5% to 1.715 million units.

Hyundai, which controls almost half of South Korea's auto market, earned 537 billion won in net profit during the fourth quarter ended Dec.31, beating a 482.6 billion won forecast by 10 analysts polled by Reuters. That compared to a 691 billion won profit a year ago and 283 billion in the previous quarter.

In the 2005 fourth quarter, Hyundai booked a 138.5 billion won gain from derivatives related to Kia shares and a near 31 billion won one-time gain from a tax refund.

The won's value on average rose 8.4% in the fourth quarter from a year earlier and gained 1.8% from the third quarter, hurting earnings of Hyundai, which sells more than three quarters of it products abroad.

A firmer won currency also dents Hyundai's price competitiveness, especially against Japanese peers such as Toyota Motor, in overseas markets, as the Japanese yen remains weak.

Sales were 7.58 trillion won, compared with a 7.56 trillion won forecast and 8.117 trillion won a year earlier when South Korean customers rushed to showrooms before a tax benefit ended.

Hyundai's full-year 2007 net profit is seen rising 22.2% to 1.87 trillion won, according to 27 brokers polled by Reuters Estimates, against 1.53 trillion won last year.

Hyundai, valued at just over $15 billion, saw its shares drop 16.8% in October-December, underperforming a 4.6% rise on South Korea's main KOSPI share index.