Hyundai Motor's Strong Performance Despite COVID-19, 4Q Operating Profit of 1.6 Trillion Won (Update)

"Luxury Cars + SUV Sales Increase" Hyundai Motor Records 1.6 Trillion KRW Operating Profit in 4Q Last Year
Last Year's Total Operating Profit Was 2.7813 Trillion KRW, Down 22.9% Year-on-Year

[Asia Economy Reporter Changhwan Lee] Hyundai Motor Company announced on the 26th that its operating profit for the fourth quarter of last year reached 1.641 trillion KRW, a 40.9% increase compared to the same period the previous year. Sales during the same period rose by 5.1% to 29.2434 trillion KRW.

Hyundai sold 1,139,583 vehicles in the fourth quarter of last year, representing a 4.7% decrease compared to the same period the previous year.

In the domestic market, despite the resurgence of COVID-19, strong sales of new models such as Tucson, GV80, G80, and Avante led to a 5.0% increase year-on-year, with 204,190 units sold.

In overseas markets, sales recovered in North America and India regions; however, demand continued to decline mainly in Europe and emerging countries due to the ongoing impact of COVID-19, resulting in a 6.6% decrease year-on-year with 935,393 units sold.

Regarding sales revenue, despite a decline in global wholesale sales and an unfavorable exchange rate environment with the Korean won strengthening from 1,176 KRW per USD in Q4 2019 to 1,118 KRW per USD in Q4 2020, revenue increased due to improved product mix effects driven by expanded sales of high value-added new vehicles.

The cost of sales ratio improved by 1.5 percentage points year-on-year to 81.6%, reflecting continued product mix improvements despite global sales decline and won appreciation. Operating expenses increased by 6.0% year-on-year to 3.7382 trillion KRW due to higher marketing costs associated with new model launches, despite company-wide cost reduction efforts.

A Hyundai Motor official stated, "Sales declined compared to the same period last year due to the impact of the COVID-19 resurgence, although global automobile demand is gradually recovering." However, "Operating profit showed significant improvement due to increased sales proportions of premium cars and SUVs such as the Genesis GV80 and G80."

The official added, "The operating profit margin for Q4 2020 was 5.6%, exceeding 5% for the first time since Q3 2017 (5.0%). This was the result of continuous product mix improvements centered on new models and profitability-focused management."

He continued, "To build investor trust and enhance transparency, we began providing annual performance guidance for the first time this year. We aim for a 14-15% growth in automotive sales revenue and a 4-5% operating profit margin in 2021."

Meanwhile, Hyundai's total operating profit for last year was 2.7813 trillion KRW, down 22.9% year-on-year, and sales revenue decreased by 1.7% to 103.9976 trillion KRW.

Plan to Sell 4.16 Million Units This Year, Sales Growth Target of 15% Year-on-Year

Regarding the outlook for the business environment, Hyundai expects that although demand recovery in the automobile market will occur this year due to prolonged COVID-19 effects, government stimulus policies, and base effects, a return to pre-COVID-19 levels is unlikely. The company anticipates continued difficult management conditions due to intensified competition and unfavorable exchange rates.

Despite the challenging environment, Hyundai plans to focus on profitability improvement through ▲ successful global market establishment of the Genesis and Ioniq brands ▲ expansion of SUV sales and optimization of production and profitability ▲ acceleration of cost innovation.

Hyundai has set a global sales target of 4.16 million units this year, comprising 741,500 units in the domestic market and 3,418,500 units overseas. The company regards this year as the first year of a major transformation toward new growth engines and plans to thoroughly prepare for future growth through eco-friendly vehicles, future technologies, and business competitiveness innovation.

Through annual performance guidance, Hyundai has set a sales revenue growth target of 14-15% and an operating profit margin target of 4-5% for the automotive sector in 2021. To sustain future growth, the company plans to invest a total of 8.9 trillion KRW this year, including 4.5 trillion KRW in capital expenditures (CAPEX), 3.5 trillion KRW in research and development (R&D), and 900 billion KRW in strategic investments.

Meanwhile, Hyundai decided to maintain the year-end dividend for 2020 at 3,000 KRW per share, the same as the previous year. This decision reflects a balanced consideration of the pace of profitability recovery and the need for future investment. Hyundai stated that it will continue to pursue a balanced approach between investment and enhancing shareholder value going forward.