Hyundai Motor Q1 Operating Profit 863.3 Billion KRW, Up 4.7% YoY... "Exchange Rate Illusion Effect" (Update)

Impact of Won Depreciation and Product Mix Improvement
Q2 Performance Expected to Decline Due to COVID-19 Spread

[Asia Economy Reporter Kiho Sung] Hyundai Motor Company's operating profit for the first quarter of this year was 863.8 billion KRW, marking a 4.7% increase compared to the same period last year. Contrary to expectations that the COVID-19 pandemic would worsen performance, the company expanded its profit margin compared to the previous year, largely due to the favorable exchange rate environment caused by the weak Korean won. However, from the second quarter onward, when production and sales are both disrupted due to the global pandemic, a decline in performance is inevitable.

Hyundai Motor Company announced this at a 2020 first-quarter business performance briefing held at its Seoul headquarters on the 23rd.

The first-quarter 2020 results were ▲ sales of 903,371 units ▲ revenue of 25.3194 trillion KRW (automotive 19.5547 trillion KRW, finance and others 5.7647 trillion KRW) ▲ operating profit of 863.8 billion KRW ▲ ordinary profit of 724.3 billion KRW ▲ net profit of 552.7 billion KRW (including non-controlling interests).

A Hyundai Motor official commented on the first-quarter results, “Despite the global automotive market facing unprecedented uncertainty due to the spread of COVID-19, resulting in reduced demand and factory shutdowns, sales decreased compared to the first quarter of last year. Nevertheless, thanks to the favorable exchange rate environment from the weak Korean won and improvements in product mix, revenue increased. However, excluding approximately 100 billion KRW in other revenue related to the Aptiv joint venture, the actual operating profit for the first quarter is understood to have decreased.”

He added, “The global real economy downturn and demand decline caused by COVID-19 are expected to intensify from the second quarter, making a decline in profitability unavoidable. Despite this difficult and uncertain business environment, the company plans to focus all capabilities on strengthening liquidity management and maintaining appropriate inventory levels to enable a swift recovery aligned with the timing of global demand recovery.”

In sales, Hyundai sold 903,371 units globally, which is an 11.6% decrease compared to the same period last year.

In the domestic market, despite strong sales of new models such as The New Grandeur and GV80, sales fell 13.5% year-on-year to 159,061 units due to domestic factory production halts caused by COVID-19 and aging of some models like Tucson. Overseas, sales decreased 11.1% year-on-year to 744,310 units due to reduced demand in China, India, Europe, and other regions.

Revenue increased year-on-year despite a decline in global wholesale sales, supported by a favorable exchange rate environment where the KRW/USD rate dropped significantly from 1,125 KRW in the first quarter of last year to 1,193 KRW this year, reflecting a weaker Korean won.

Additionally, improvements in product mix centered on new cars and SUVs, and reduced incentives in the U.S. market contributed to increased automotive revenue, while finance and other sectors also saw growth. There was also other revenue generated from a one-time factor related to the Aptiv joint venture's equity contribution.

The cost of sales ratio improved by 0.5 percentage points year-on-year to 83.2%, reflecting continued mix improvement due to a higher proportion of global SUV segments, company-wide cost innovation efforts, and the positive impact of the weak Korean won.

Operating expenses increased 10.2% year-on-year to 3.4015 trillion KRW, driven by rising marketing costs associated with successive new model launches.

As a result, Hyundai's operating profit for the first quarter of 2020 rose 4.7% year-on-year to 863.8 billion KRW, with an operating margin remaining steady at 3.4% compared to the previous year.

Ordinary profit declined 40.5% year-on-year to 724.3 billion KRW due to deteriorated earnings from affiliates and reduced foreign exchange gains, while net profit stood at 552.7 billion KRW.

A Hyundai Motor official explained, “From the first quarter onward, when the impact of COVID-19 became more pronounced, we will focus all efforts on minimizing profit deterioration by managing liquidity and maintaining appropriate inventory levels in preparation for a sharp sales decline.”

Hyundai anticipates that the negative effects of COVID-19 will intensify from the second quarter, further expanding uncertainty in the automotive industry environment, and expects a decline in profitability due to reduced automotive demand.

Furthermore, with the significant volatility in international oil prices, recovery in sales may be delayed not only in developed countries but also in emerging markets, making the outlook for sales recovery more uncertain than ever.

In this challenging business environment, Hyundai is internally reviewing various scenarios regarding future demand and sales forecasts and is establishing a crisis response system for rapid business stabilization. The company plans to implement activities such as liquidity risk management, strategic inventory and sales operations, flexible production system establishment, and stable parts supply.

To minimize profitability decline due to reduced demand, Hyundai plans to continue expanding new car sales and improving product mix in the relatively resilient domestic market, and to offset overseas performance deterioration through efficient inventory management, incentive operations, and increased supply focused on new cars and SUVs.

Meanwhile, Hyundai also stated that it is actively implementing customer support measures such as warranty period extensions, online new car launches, and activation of non-face-to-face sales channels.

Additionally, Hyundai plans to continue strengthening new technology capabilities to secure leadership in future markets such as electrification and autonomous driving. For eco-friendly vehicles, the company intends to strive to meet regulations and secure a competitive edge in electrification.

This content was produced with the assistance of AI translation services.