Hyundai Motor's Operating Profit Last Year 2.78 Trillion Won, Performed Well Despite COVID-19 (Comprehensive)

Q3 Provisions Issue Leads to Annual Earnings Decline
Q4 Operating Profit Holds at 1.6 Trillion Won Due to Increased Sales of Luxury Cars and SUVs
Efforts Continue to Build Investor Trust and Enhance Transparency with Annual Earnings Guidance Introduction
2021 Auto Division Sales Growth Targeted at 14-15% Year-on-Year

[Asia Economy Reporter Changhwan Lee] Hyundai Motor Company announced on the 26th that it recorded an annual operating profit of 2.7813 trillion KRW last year. This is considered a relatively strong performance despite the deteriorated business environment caused by the novel coronavirus disease (COVID-19).

Hyundai Motor disclosed on the same day that its annual operating profit last year was 2.7813 trillion KRW, down 22.9% from the previous year, and sales decreased by 1.7% to 103.9976 trillion KRW. The operating profit margin fell by 0.8 percentage points to 2.7%.

The number of vehicles sold was 3,744,737 units (787,854 units domestically, 2,956,883 units overseas), a decrease of 15.4%. Domestic sales increased by 6.2%, but overseas sales dropped by 19.7%.

The poor annual operating profit compared to the previous year was attributed to the third quarter’s reflection of quality costs, which resulted in a loss.

In the third quarter of last year, Hyundai Motor recorded an operating loss of 313.8 billion KRW by reflecting quality costs of 2.1352 trillion KRW, including additional provisions for the Theta2 engine. Excluding the provision issue, the performance is analyzed as relatively strong despite COVID-19.

Genesis GV80

Significant Improvement in Q4 Performance Due to Increased Sales of Luxury Cars and SUVs

The fourth quarter results announced on the same day showed significant improvement compared to the same period last year. Hyundai Motor stated that its operating profit in Q4 last year was 1.641 trillion KRW, up 40.9% year-on-year. Sales during the same period increased by 5.1% to 29.2434 trillion KRW.

Hyundai Motor sold 1,139,583 units in Q4 last year. This is a 4.7% decrease compared to the same period last year. In the domestic market, despite the resurgence of COVID-19, sales of new models such as Tucson, GV80, G80, and Avante performed well, resulting in a 5.0% increase to 204,190 units compared to the same period last year.

In overseas markets, sales recovered in the North American and Indian regions, but demand continued to decline mainly in Europe and emerging countries due to the ongoing impact of COVID-19, resulting in a 6.6% decrease to 935,393 units compared to the same period last year.

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, sales increased due to product mix improvement effects from expanded sales of high value-added new models.

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

A Hyundai Motor official said, "Sales decreased due to continued negative growth compared to the same period last year, as global automobile demand is gradually recovering but affected by the resurgence of COVID-19," adding, "Operating profit showed a significant improvement due to the increased sales proportion of luxury cars and SUVs such as Genesis GV80 and G80."

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

Ioniq 5 Teaser Image

Plan to Sell 4.16 Million Units This Year, Sales Growth Target of 15% Compared to Last Year

Regarding the outlook for the business environment, Hyundai Motor forecasted that although demand recovery in the automobile market will appear this year due to prolonged COVID-19 effects, government stimulus policies, and base effects, recovery to pre-COVID-19 levels is unlikely, and difficult business conditions such as intensified competition and unfavorable exchange rates will continue.

Despite the challenging business environment, Hyundai Motor plans to focus on improving profitability 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 Motor set its global sales target for this year at 4.16 million units, combining 741,500 units in the domestic market and 3,418,500 units overseas. The company aims to make this year 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 its annual performance guidance, Hyundai Motor set a sales growth target for the automotive sector of 14-15% year-on-year in 2021 and an operating profit margin target of 4-5%. To sustain future growth, it 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 Motor decided to maintain the year-end dividend for 2020 at 3,000 KRW, the same as the previous year. This decision reflects a balanced consideration of the speed of profitability recovery and the need for future investment. Hyundai Motor stated that it will continue to pursue a balanced approach between investment and enhancing shareholder value going forward.