Feb. 13 (Bloomberg) -- Hyundai Motor Co., South Korea's largest automaker, said fourth-quarter profit surged 81 percent, helped by growing overseas demand for pricier models such as the Sonata sedan and Santa Fe sport-utility vehicle.

Net income rose to 459 billion won ($395 million) for the quarter, compared with 253.9 billion won in 2002, the Seoul-based carmaker said in a statement. Sales rose 6.2 percent.

Hyundai Motor has lifted its sales in the U.S. and in Europe after moving up the rankings in surveys such as J.D. Power & Associates' Initial Quality Study. Car sales at home slumped after the government tightened lending rules and a record number of people defaulted on their household debts.

``Hyundai is showing sound growth in terms of brand power and technology,'' said Park Hyung Ryul, who helps manage the equivalent of $861 million at KTB Asset Management Co. in Seoul. Park doesn't intend to buy more shares in Hyundai Motor for the time being because ``domestic demand isn't showing signs of recovery yet.''

Hyundai Motor's shares fell 1.7 percent to 46,850 won in Seoul. Before the earnings were announced, they traded around 47,000 won. The stock has dropped 7 percent this year, compared with the benchmark Kospi Index's 8.7 percent gain.

Net income for the quarter exceeded a median estimate of 431.6 billion won by 10 analysts surveyed by Bloomberg News.

Operating profit more than doubled to 726 billion won in the fourth quarter, while sales for the period rose 6.2 percent to 7.25 trillion won.

Strong Exports

Hyundai Motor, which is expanding on three continents to become one of the world's top five automakers by 2010, exports more than half of its vehicles overseas, with a fifth of its sales coming from the U.S., its biggest export market.

Fourth-quarter sales in the U.S. increased 17 percent from a year earlier to 91,237 vehicles and those in western Europe rose 5.5 percent to 55,876.

``Sales of pricier vehicles, efforts to lower costs and improve our brand image helped Hyundai Motor's earnings,'' Park Hwang Ho, the automaker's president, told investors and analysts at a briefing in Seoul after the figures were released.

Hyundai Motor, the seventh-largest automaker in the U.S., has more than quadrupled sales in the world's biggest auto market since 1998 as it improves its image and sheds its reputation for producing poorly made vehicles.

In J.D. Power's 2003 survey, Hyundai Motor rose to 13th place out of 37 automakers in the U.S. Its 2002 ranking wasn't given.

The automaker is betting its plant in Alabama, which starts operations in March next year, will give it an additional boost.

``We are expecting to sell 30,000 more Santa Fe SUVs in the U.S. this year,'' Park said. ``We already have back orders for more than 20,000 this vehicles.''

Strengthening Euro

The euro's strengthening against the won and U.S. dollar and reduced spending on research and development also helped boost Hyundai Motor's earnings, the company said.

The euro traded at an average of 1,363 won last year, 15 percent more than the average 1,183.50 won in 2002. That helped Hyundai Motor earn more from exports to Europe when converting its sales to the local currency.

European exports accounted for 28.5 percent of its total overseas shipment last year, up from 27.1 percent in 2002. Hyundai Motor plans to raise sales to Europe so they represent 40 percent of total overseas sales in the coming years.

Hyundai Motor spent about 203.3 billion won in research and development costs in the fourth quarter, 50 percent less than the 407.4 billion won spent a year earlier. For the full year, it booked 669.9 billion won, 42 percent lower than in 2002.

The carmaker sold 52,000 Sonatas in China last year after its Beijing venture started producing the sedans in December 2002. Hyundai Motor forecast this year's sales in Asia's second-biggest economy to more than double to 130,000 units, lifted by the introduction of the Avante sedan in China.

Domestic Weakness

Still, consumer demand in South Korea is recovering at a slower pace than economists and analysts expected. Domestic sales at South Korea's five automakers dropped 39 percent from a year earlier in January.

Hyundai Motor's sales in South Korea dropped 38 percent last month from a year earlier to 37,469 vehicles, the lowest since February 1999, because there were fewer working days from a five- day Lunar New Year holiday and a spending slump hampered sales.

For the full year, net income rose 21 percent to a record 1.75 trillion won, with sales up 1.6 percent to 25 trillion won. Operating profit rose to a record 39 percent to 2.24 trillion won.

Last month, Hyundai Motor said it expects this year's operating profit to reach a record 2.6 trillion won on sales of 26.9 trillion won.

``We expect domestic auto sales to reach about 1.4 million units this year,'' Hyundai Motors' President Park said. ``We expect to have half of that market.''

To contact the reporter on this story: Kyunghee Park in Seoul kpark3@bloomberg.net.

Last Updated: February 13, 2004 02:12 EST