Hyundai Motor's Record Q2 Performance... Offset Various Adversities with High-Priced Car Sales (Comprehensive Report 2)

Operating Profit Hits 2.9798 Trillion Won 'Earnings Surprise'
Sales Volume Declines but Revenue Reaches Record High of 36 Trillion Won
"Uncertainty Is High but Performance Targets Set Early This Year Are Maintained"

[Asia Economy Reporter Kiho Sung] Hyundai Motor Company recorded its highest-ever performance in the second quarter of this year. It showed a strong growth in performance despite various adverse factors such as semiconductor and other parts supply disruptions, rising raw material prices, and a decline in global sales.

Hyundai explained that this performance was the result of improvements in the 'mix' (composition ratio by vehicle type), with increased sales of high-profit vehicles such as sports utility vehicles (SUVs), mid-to-large luxury sedans, and eco-friendly vehicles including electric cars, combined with a favorable exchange rate effect. However, it forecasted that difficult management conditions would continue due to geopolitical risks and the resurgence of COVID-19.

On the 21st, Hyundai Motor announced that its second-quarter results for this year, based on IFRS consolidated standards, recorded sales of KRW 35.9999 trillion (automobiles KRW 28.504 trillion, finance and others KRW 7.4959 trillion) and operating profit of KRW 2.9798 trillion. This is the first time since the second quarter of 2014 (KRW 2.0872 trillion) that Hyundai’s quarterly operating profit exceeded KRW 2 trillion. The previous record was KRW 2.5372 trillion in the second quarter of 2012, making this a record surpassed after 10 years.

Hyundai stated, "Second-quarter sales decreased compared to the same period last year due to continued production shortages caused by global vehicle semiconductor and other parts supply disruptions," but added, "Operating profit increased compared to the same period last year despite the decrease in sales volume, thanks to improved sales mix centered on Genesis and SUVs, improved regional mix focused on advanced countries, and a favorable exchange rate effect."

Global sales decreased but sales revenue and operating profit increased

In the second quarter of 2022 (April to June), Hyundai sold 976,350 units in the global market. This represents a 5.3% decrease compared to the same period last year.

In the domestic market, 182,298 units were sold, down 9.2% from the same period last year. Overseas sales were 794,052 units, a 4.4% decrease compared to the same period last year.

Sales revenue was recorded at KRW 35.9999 trillion, an 18.7% increase compared to the same period last year. The improvement in sales mix centered on Genesis and sports utility vehicles (SUVs), reduction in incentives, and exchange rate effects offset the impact of the overall volume decline, resulting in increased sales revenue. The average KRW-USD exchange rate in the second quarter rose 12.3% year-on-year to 1,260 won.

As a result, operating profit for the second quarter was KRW 2.9798 trillion, a 58.0% increase compared to the same period last year. The operating profit margin was 8.3%.

Ordinary profit and net profit were KRW 3.8888 trillion and KRW 3.0848 trillion, respectively.

Meanwhile, cumulative results for the first half of the year (January to June) were ▲sales of 1,879,041 units ▲sales revenue of KRW 66.2985 trillion ▲operating profit of KRW 4.9087 trillion.

"Mix improvement centered on high value-added vehicle types"

Regarding the outlook for the management environment, Hyundai expects improvements in semiconductor and parts supply conditions and gradual production expansion, but anticipates that unpredictable management conditions will continue due to global uncertainties such as sharp rises in raw material prices caused by geopolitical conflicts between countries, concerns over the resurgence of COVID-19, inflation expansion, and interest rate hikes.

It also cited increased marketing costs due to expanded exchange rate volatility and intensified competition among companies as burdens on management activities.

The global automobile market is expected to continue high growth in the eco-friendly vehicle market centered on electric vehicles, influenced by stricter environmental regulations in major countries, increased investment in eco-friendly infrastructure, and expanded preference for eco-friendly vehicles.

In this regard, Hyundai plans to focus on ▲strengthening its electric vehicle lineup with the launch of the second model of the electric vehicle-only brand ‘IONIQ,’ the ‘IONIQ 6,’ in the third quarter of 2022 ▲maximizing sales through production and sales optimization ▲expanding market share and defending profitability through mix improvement centered on high value-added vehicle types.

Meanwhile, Hyundai announced that it will pay an interim dividend this year as well, following last year. The amount is KRW 1,000 per common share, the same as last year.

The total dividend amount is KRW 257.814 billion. The dividend yield is 0.6% for common shares and 1.2% for preferred shares.

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