Hyundai Motors on Thursday reported a 12.5% rise in fourth-quarter profit, despite the impact of a weak yen that blunted its price competitiveness overseas against Japanese rivals.
Net profit for South Korea's top carmaker amounted to 2.13 trillion won ($1.98 billion) from October to December, up 12.5% from the same period in 2012 when the company had set aside 240 billion won to compensate US owners for inaccurate fuel-consumption estimates.
Operating profit rose 10.8% to 2.3 trillion won, while sales fell 3.4% to 21.9 trillion won.
"Sluggish domestic sales and the won's strength and the yen's weakness put pressure on the quarterly results," the company said in a statement.
For the entire year of 2013, sales rose 3.4% to reach 87.3 trillion won. But operating and net profit fell 1.5% and 0.7% to reach 8.3 trillion won and 8.9 trillion won respectively.
The Korean currency has risen steadily in the past year against the dollar and the Japanese yen, hitting its highest against both currencies in about five years.
The yen has tumbled owing to an aggressive monetary easing programme put in place by the Bank of Japan as part of Prime Minister Shinzo Abe's drive to kickstart the world's third-largest economy.
A strong won weakens the price competitiveness of major South Korean exporters like Samsung and Hyundai in overseas markets, and reduces the value of their overseas earnings when repatriated.
Hyundai, along with its smaller affiliate Kia, forms the world's fifth-largest automaking group.
Hyundai chairman Chung Mong-Koo said earlier this month the group would sell 7.86 million cars this year, up 3.9% from 2013 and the weakest annual growth since 2003.
Lee Won-Hee, Hyundai's chief financial officer, acknowledged the company faced a tough road ahead.
"Many are concerned that Japanese carmakers, with extra profits created by the weak yen, will be able to invest heavily on future technologies for environmentally-friendly cars," he said.
"We are aware of that ... and will beef up our research and development spending to develop future-generation cars."
Lee predicted that demand in the US this year would likely slow with the eventual phasing-out of the country's monetary easing policy.
But China would sustain two-digit growth this year.
"In particular, China's SUV market is growing and we are planning to launch small SUVs soon this year," he said.