Hyundai Motor Co., South Korea's top automaker, posted a better-than-expected 27 per cent rise in quarterly profit, as a stronger performance at its credit card and overseas units offset the impact of a labour strike and a stronger won.
The world's seventh-biggest automaker is set to benefit from a post-strike order backlog, a more stable won and on expectations of further healthy profits from affiliates.
Fourth-quarter net profit is expected to rise 34 per cent from last year, according to Reuters Estimates, with full-year net seen rising 21 per cent to 2.17 trillion won.
Analysts said overseas operations would set the tone for future earnings.
"The most important driver for Hyundai's earnings will be its overseas outlets, including the United States, East Europe and Russia, more than its home market," said Chang In-hwan, chief executive and fund manager at KTB Asset Management.
Hyundai shares turned around initial losses to rise as much as 4.1 per cent after director Hwang Yoo-no said fourth-quarter sales and recurring profit margins would hit record highs.
The shares closed 1.7 per cent higher at 76,500 won versus a 1.07 per cent fall in the wider market.
Recurring profit margins reflect not only earnings from its production at home but gains from its stake holdings in financial units such as credit card issuer Hyundai Card and its Chinese joint venture Beijing Hyundai Automotive Corp.
Hyundai, which aims to become one of the world's top six by 2010, said third-quarter net profit rose to 534.9 billion won (£290 million), beating a 469 billion won forecast from eight analysts surveyed by Reuters.
Gains from holdings in affiliates amounted to 211 billion won in the quarter ended September 30, similar to its earnings of 268 billion won from domestic car production, Mr Hwang said.
This included 62.3 billion won from its financial units Hyundai Card Co. and Hyundai Capital.
"We are operating at full capacity now and we expect sales and the recurring profit margin to reach record high levels in the fourth quarter," Mr Hwang said. The company was hit by strike disruption in August and September.
Some analysts expressed concern about falling operating profit from domestic production but Mr Hwang said this should be offset by increasing output abroad.
"Much of the gains from affiliates came from 100 per cent-owned production companies in China, India and Turkey, and we expect these companies to continue to contribute to our profits," said Mr Hwang.
Shares in Hyundai, valued at £8.8 billion, soared 42 per cent in July-September double the broad market's gain.
The South Korean firm also said it would spend 273.5 billion won to produce eco-friendly diesel engines for commercial vehicles domestically from late 2007.
In May, Hyundai launched its first US plant in Alabama. One third of its sales are in the United States and problems at General Motors and Ford Motor Co. could allow Hyundai and Japanese firms such as Toyota Motor Corp. and Honda Motor Co. to sell more cars in the world's biggest auto market.
Last week, Ford said it swung to a loss in the third quarter as sales of sport utility vehicles declined. GM reported a $1.6 billion quarterly loss.
Hyundai's July-September sales dropped to 6.15 trillion won from 6.54 trillion won a year ago and 6.95 trillion won in the second quarter.
Mr Hwang said sales for the current December quarter would likely hit a quarterly record of about eight trillion won, compared with 7.5 trillion won a year ago.