Record-high operating profit for the quarter... Consecutive record operating profit for 2 quarters
Global sales of 1.02 million units in Q1... 13% increase YoY
Semiconductor supply issues resolved... Production volume↑·Performance 'defense'
"We will strive to receive IRA benefits by 2026"
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 its consolidated sales for the first quarter of 2023 reached 37.7787 trillion KRW, with an operating profit of 3.5927 trillion KRW. Sales increased by 24.7% and operating profit rose by 86.7% compared to the same period last year. Additionally, ordinary profit was 4.5909 trillion KRW and net income 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 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 rates. Selling and administrative expenses increased due to higher marketing costs for new models. However, the ratio of selling and administrative expenses to sales decreased by 1.8 percentage points from the same period last 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%). Sales volume was 1,021,712 units, a 13.2% increase compared to the same period last year.
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 strong pending demand. However, there are concerns about demand decline due to geopolitical risks and interest rate hikes causing management uncertainties."
Along with the earnings announcement, Hyundai Motor unveiled its ‘mid-to-long-term shareholder return policy.’ The core of this policy includes 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 income. The dividend payout ratio is set at 25% or more based on annual consolidated controlling shareholder net income.
The dividend frequency has been expanded from twice a year to four times a year, and the company plans to cancel 1% of its treasury stock annually over the next three years.
Hyundai Motor plans to actively strive to achieve sales growth and operating profit margin targets by expanding sales volume and improving the product mix focused on high value-added products, based on production normalization through improved operating rates, amid ongoing management uncertainties.
Hyundai Motor expects favorable future performance due to increased production from improved operating rates and entering the seasonal peak in the second quarter. The conference call revealed that current production volume corresponds to inventory levels that are not excessive relative to sales. Therefore, the company plans to increase second-quarter production as originally planned. Hyundai Motor explained that the semiconductor supply shortage, which negatively impacted production last year, has been resolved.
However, it anticipates a challenging management environment due to ongoing global uncertainties such as geopolitical conflicts between countries, inflation expansion, and demand contraction concerns from interest rate hikes.
Hyundai Motor expects the global automobile 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 5th generation fully redesigned ‘Santa Fe.’
Hyundai Motor is also preparing a plan to ‘defend’ its performance in the U.S. market under the Inflation Reduction Act (IRA). First, it will expand sales of commercial lease vehicles in the U.S. to ensure they receive the same benefits as electric vehicle subsidies. The lease ratio, which was only 5%, is being expanded to 35% this year. Furthermore, it predicts that all electric vehicle models will qualify for IRA benefits by 2026. A Hyundai Motor official said, “Batteries are scheduled to be produced in the joint venture factory with SK On in the second half of 2025, which will sufficiently supply the models produced that year,” and added, “We expect all models produced in 2026 to qualify for IRA benefits.”
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