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Monday, January 21, 2008

Hankook Tyre's Q4 2007 Results

It is hard to know how to interpret the following news release from Bloomberg:

Hankook Tire Co., South Korea's biggest tiremaker, reported a 72 percent drop in fourth-quarter profit because of a loss of about a 20 billion won ($21 million) at its new plant in Hungary.

Net income dropped to 7 billion won from 25.3 billion won a year earlier, the Seoul-based company said in a regulatory filing today. The loss at the Hungarian factory was from start- up costs, spokesman Calvin Pak said in a phone interview without elaboration.

Start-up costs can, of course, be playing a significant part, but I suspect that there is more here. The thing most of the commentators seem to be missing is the corrosive effect that the endemic inflation and the rising currency values will more than likely have on the future path of inward investment. I have the impression that the Hankook plant was really Hungary's showpiece in greenfield investment project until only recently, and this sort of news isn't going to make it any easier to sell more such projects, whatever the actual explanation for Hankooks initial results.

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