Hyundai Motor Earned 1.2 Trillion Won Monthly in Q1... "Earnings Surprise"

Hyundai Motor Company recorded an operating profit of 3.6 trillion KRW in the first quarter. This earnings surprise exceeded the market forecast of 2.9 trillion KRW and also surpassed Samsung Electronics' operating profit of 600 billion KRW.

On the 25th, Hyundai Motor held a management performance conference call at its headquarters in Seoul and announced that it recorded consolidated sales of 37.7787 trillion KRW and an operating profit of 3.5927 trillion KRW for the first quarter of 2023. Sales increased by 24.7% and operating profit by 86.7% compared to the same period last year. Additionally, ordinary profit reached 4.5909 trillion KRW and net profit for the period was 3.4194 trillion KRW.

Sales were influenced by expanded sales, an improved sales mix centered on Genesis and Sports Utility Vehicles (SUVs), and favorable exchange rate effects. The average KRW-USD exchange rate in the first quarter of 2023 rose 5.9% year-on-year to 1,276 KRW.

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The cost of sales ratio decreased by 1.3 percentage points from the same period last year to 79.6%. This improvement was due to increased operating rates from better parts supply conditions and favorable exchange rate effects. Selling and administrative expenses increased due to higher marketing costs for new vehicles. However, the ratio of selling and administrative expenses to sales decreased by 1.8 percentage points year-on-year to 10.9%.

As a result, first-quarter operating profit rose 86.3% year-on-year to 3.5927 trillion KRW, marking the highest quarterly operating profit in history. This is the second consecutive quarter of record-high operating profits. The operating profit margin reached 9.5%, the highest quarterly figure since the third quarter of 2013 (9.7%).

Hyundai Motor sold 1,021,712 vehicles in the first quarter of 2023, a 13.2% increase compared to the same period last year. Production increased due to improved supply conditions for global automotive semiconductors and other parts, contributing to the sales growth. Operating profit was influenced by increased sales volume, an improved mix centered on high value-added models, and favorable exchange rate effects.

A Hyundai Motor official stated, “As the semiconductor supply shortage improves, production is expanding, but inventory levels in key markets remain low, so sales growth is expected based on solid backlog demand. However, there are concerns about demand decline due to geopolitical risks and interest rate hikes causing management uncertainties.”

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Along with the earnings announcement, Hyundai Motor unveiled a ‘Mid-to-Long-Term Shareholder Return Policy’ aimed at enhancing corporate value through an active and transparent shareholder return policy. The key points of this policy include establishing a new dividend policy, implementing quarterly dividends, and a phased plan for treasury stock cancellation.

The new dividend policy changes the dividend base from the previous Free Cash Flow (FCF) to consolidated controlling shareholder net profit. The dividend payout ratio is set at 25% or more based on annual consolidated controlling shareholder net profit. Hyundai Motor aims to enhance dividend transparency and visibility through this new policy.

The dividend frequency has been expanded from twice a year to four times a year. Hyundai Motor intends to increase the attractiveness of long-term stockholding while mitigating stock price volatility. Lastly, Hyundai Motor plans to cancel 1% of its treasury stock annually over the next three years.

A Hyundai Motor official explained, “We will continue to actively establish various shareholder-friendly policies to maximize shareholder value and strive to achieve corporate value that meets market expectations.”

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Looking ahead, Hyundai Motor expects ongoing management uncertainties but plans to actively pursue sales volume expansion and mix improvement centered on high value-added products based on production normalization through improved operating rates to achieve sales growth and operating profit margin targets.

Hyundai Motor anticipates favorable future performance due to production expansion from improved operating rates and entering the seasonal peak in the second quarter. However, it expects a challenging management environment due to global uncertainties such as geopolitical conflicts between countries, inflation expansion, and demand contraction concerns from interest rate hikes. Exchange rate volatility and increased marketing costs due to intensified competition among companies are also expected to be burdens on management activities.

Nonetheless, Hyundai Motor expects the global automotive market to continue strong growth in the eco-friendly vehicle sector, especially electric vehicles, driven by stricter environmental regulations in major countries, increased investment in eco-friendly infrastructure, and growing preference for eco-friendly vehicles. Hyundai Motor plans to focus on expanding electric vehicle sales through the global launch of the ‘Ioniq 6,’ and the release of the ‘Ioniq 5 N’ and ‘The All-New Kona Electric,’ maximizing sales through production and sales optimization, and expanding market share and defending profitability through mix improvement centered on high value-added models such as the global launch of the fifth-generation completely redesigned ‘Santa Fe.’

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