Profit-Focused Selective Order Strategy Effective... Cost-Cutting Measures Like Tightened Management Combined
Q1 Sales 386.4 Billion KRW, Operating Profit 4.3 Billion KRW... First Profit in 5 Quarters Since Q4 2018
Saudi Aramco Client, Only Domestic Medium-Voltage Electrical Vendor... Increased Bidding Competitiveness
[Asia Economy Reporter Kim Hyewon] Jo Seok, President of Hyundai Electric (photo), has set a goal to break away from deficit management and maintain an annual "profit" just four months after taking office.
According to the Financial Supervisory Service's electronic disclosure system on the 28th, Hyundai Electric recorded sales of 386.4 billion KRW and an operating profit of 4.3 billion KRW based on consolidated financial statements for the first quarter. Sales decreased by 7.5% compared to the same period last year (417.9 billion KRW) due to the base effect from the client's budget execution within the year in the previous quarter, but operating profit turned positive for the first time in five quarters since the fourth quarter of 2018. Net profit also returned to a surplus of 10.6 billion KRW.
This improvement in performance is interpreted as a result of efforts to reduce costs through a profitability-focused selective order strategy, process efficiency enhancement, and tight management. President Jo said in a phone interview with Asia Economy, "It is the result of securing profitable orders and innovatively reducing costs," adding, "We are making efforts to reduce costs in all areas, from purchasing procedures to design and production." In particular, projects contracted in the second half of last year in the ultra-high voltage equipment sector, such as high-voltage circuit breakers and power transformers, were reflected in this quarter's sales, and the transformer smart factory in Ulsan, which improved production efficiency in January, began full-scale operation, improving the profitability of core products.
The consecutive order successes from Saudi Aramco, the largest client requiring both high quality and technology, are credited as the main factor for the turnaround to profitability. Last month, President Jo signed a contract to supply equipment worth 18.3 billion KRW for the Majan offshore plant with Aramco. Among domestic medium and high-voltage electrical equipment companies, Hyundai Electric is the only one qualified to supply Aramco and is listed among its partners.
Hyundai Electric's profitable trajectory starts now. The sales target for this year on a consolidated basis is set at 1.8979 trillion KRW, a 7.2% increase from the previous year. President Jo expressed his ambition, saying, "From the second quarter onward, we will continue stable orders, sound management, and cost reductions through high-intensity tightening," promising to maintain profitability continuously.
Hyundai Electric plans to actively participate in projects in developing countries supported by Official Development Assistance (ODA) and bids for Saudi Aramco construction to secure profitability, and to lead performance improvement by expanding the power ICT solution business area, which is regarded as a future growth engine.
After the earnings announcement yesterday, President Jo attended a conference call and emphasized, "Overseas, we will actively participate in Saudi Aramco and ODA projects, and expand business centered on local factories in Alabama, USA, and China," adding, "In the energy solutions sector, we will break away from the simple EPC (Engineering, Procurement, and Construction) business structure and accelerate portfolio expansion such as developing and investing in energy efficiency projects."
Hyundai Electric is also strengthening competitiveness in the renewable and smart power markets in line with the government's "Renewable Energy 3020" policy, such as signing a memorandum of understanding (MOU) with Hyundai Construction in February for power infrastructure and new energy businesses.
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