Hyundai Motor Maintains Profit in Q2... Operating Profit Halved Compared to Previous Year (Comprehensive)

[Asia Economy Reporter Kiho Sung] Hyundai Motor Company's operating profit for the second quarter of this year was 590.3 billion KRW, down 52.3% compared to the same period last year. Although this figure is higher than the securities market consensus (average forecast) of 307.7 billion KRW, it reflects the direct impact of the novel coronavirus disease (COVID-19). On the other hand, since most global automakers are expected to record losses in the second quarter of this year, Hyundai is considered to have performed relatively well. Hyundai announced that it will cancel the interim dividend this year and review the annual dividend based on the profit and loss normalization trend in the second half of the year.

On the 23rd, Hyundai Motor Company announced at its earnings presentation that it recorded sales of 21.859 trillion KRW (automobiles 16.0565 trillion KRW, finance and others 5.8025 trillion KRW) and an operating profit of 590.3 billion KRW. These figures represent decreases of 18.9% and 52.3%, respectively, compared to the same period last year. Net profit for the period, including non-controlling interests, was 377.3 billion KRW, down 62.2%.

Global sales in the second quarter totaled 703,976 units, a 36.3% decrease compared to the same period last year. In the domestic market, despite the impact of COVID-19, sales increased by 12.7% year-on-year to 225,552 units due to demand recovery from the reduction in individual consumption tax and strong sales of new models such as the GV80, G80, and Avante. In overseas markets, sales reached 478,424 units, down 47.8% year-on-year, due to decreased demand caused by COVID-19 in all regions except China.

Operating expenses decreased by 7.8% year-on-year to 3.1215 trillion KRW due to company-wide cost-cutting efforts to overcome the uncertain business environment. As a result, Hyundai's operating profit for the second quarter of 2020 was 590.3 billion KRW, down 52.3% year-on-year, and the operating profit margin fell by 1.9 percentage points to 2.7% compared to the same period last year.

The cumulative results up to the second quarter (January to June) were ▲sales of 1,607,347 units ▲sales revenue of 47.1784 trillion KRW ▲operating profit of 1.4541 trillion KRW.

Kim Sang-hyun, Executive Vice President and Head of Hyundai Motor's Finance Division, expressed concern, saying, "Demand recovery is expected from the third quarter, with the second quarter being the bottom," but added, "Uncertainty remains due to the resurgence of COVID-19."

Accordingly, Hyundai announced that it will not pay an interim dividend this year. Kim said, "The decision not to pay an interim dividend this year was made to secure liquidity amid management uncertainties," and added, "We plan to determine the annual dividend level for this year by balancing management uncertainties, sales normalization trends, and investment strategies in the second half."

The outlook remains uncertain. Lee Bo-sung, Managing Director and Head of Hyundai Motor's Global Management Research Institute, said, "In this COVID-19 crisis, both developed and emerging countries are experiencing simultaneous downturns, so we expect sales rates to recover to last year's levels around 2023," and pointed out, "The global market is mostly stagnant or declining due to the shock of COVID-19. Short-term growth adjustments are inevitable due to global shutdowns, delays in electric vehicle launches, and decreased purchasing power."

Kim also forecasted, "It will take a long time for emerging countries to recover to pre-COVID-19 levels," and added, "Support measures for the automotive industry in each country will lead to medium- to long-term fiscal burdens, raising concerns about prolonged low growth."

Hyundai plans to continue crisis management focused on liquidity management in the second half of the year, while focusing on expanding market share and defending profitability through ▲improving the product mix by increasing sales of high value-added products such as new cars and SUVs ▲implementing regional sales normalization measures.

In particular, Hyundai aims to improve profitability by increasing sales of high value-added products such as the Genesis brand. Hyundai launched new GV80 and G80 models in the domestic market in the first half of this year, and the Genesis sales ratio in the global market increased by 3 percentage points year-on-year to 5.4%. Kim explained, "In the domestic market in the second quarter, the sales ratio of Genesis nearly doubled to 16.2% compared to the same period last year," and added, "As of the end of the second quarter, the number of Genesis vehicles not yet delivered in the domestic market is about 40,000 units."

He continued, "Sales are expected to perform well in the second half with expansion into overseas markets such as the United States," and added, "In the U.S. market in the second half of this year, we set a sales target of about 350,000 units, a 25% increase compared to the first half, by expanding the momentum of new models such as the G80, GV80, and Avante."

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