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Hyundai Profit Jumps 71% to Record, Beating Estimates on Overseas Demand
Hyundai Motor Co., South Korea’s largest automaker, said it expects to beat its annual revenue forecast after posting record profit on brisk overseas sales that offset sluggish domestic demand.
The automaker will probably sell more than its initial plan of 3.46 million vehicles as new models including revamped Sonata lure buyers, Chief Financial Officer Lee Won Hee told reporters today, without disclosing a new sales goal.
Net income jumped 71 percent to 1.39 trillion won ($1.2 billion) in the three months ended June 30, from 811.9 billion won a year earlier, the Seoul-based carmaker said in a regulatory filing today. That compares with the 1.13 trillion won average of 31 analyst estimates compiled by Bloomberg. Sales rose 18 percent to 9.56 trillion won.
Chairman Chung Mong Koo raised second-quarter global retail sales 13 percent, led by a 33 percent surge in U.S. deliveries, after Hyundai began selling revamped Sonata sedans this year. Plans to introduce new Elantra compacts and Azera premium sedans may ease slumping domestic sales, which plunged 35 percent in June, and offset slower growth in China and Europe as governments reduce sales incentives.
“Global auto demand will likely slow in the second half as government incentives are removed and there are some macroeconomic uncertainties,” Lee told reporters in Seoul today. “Still, we expect our sales to grow from the first half helped by firm sales in the U.S. and emerging markets.”
Operating Profit
Operating profit, or sales minus the cost of goods and administrative expenses, rose 31 percent to 863.3 billion won from 657.2 billion won, Hyundai said.
Hyundai declined 0.7 percent to close at 144,000 won in Seoul trading, compared with the key Kospi index’s 0.2 percent drop. The shares have gained 19 percent this year.
“Brisk overseas sales more than compensated for the weak home market,” Kim Do Joon, a fund manager at Hanwha Investment Trust Management Co. in Seoul, which manages $8.8 billion worth of assets including Hyundai stock, said before the earnings announcement. “Hyundai’s shares may not outperform the broader Korean market, but its long-term structural growth will continue.”
Second Quarter Sales
Hyundai delivered 916,507 vehicles to global customers in the second quarter, 13 percent more than a year earlier, according to company data. Sales in the U.S. jumped 33 percent, led by Sonata sedans and Tucson sport-utility vehicles introduced early this year. Sales in China and India gained 17 percent each.
Deliveries in South Korea, Hyundai’s most profitable market, fell 18 percent during the quarter after the government cut incentives and as affiliate Kia Motors Corp. and other rivals won market share.
The carmaker sold 144,273 Sonata sedans, Tucson SUVs and other models in the April-June period in the U.S., compared with 108,832 units a year earlier, even as it reduced incentive spending per vehicle 46 percent from a year ago to an average of $1,760, Ahn Sang Joon at Tong Yang Securities said.
Profit contributions from affiliates including Kia, 34 percent owned by Hyundai and other overseas factories nearly fivefold to 1.3 trillion won in the first half from 271 billion a year earlier, the company said in today’s statement. It didn’t provide breakdown for second quarter.
“It’s not a surprise that Hyundai raised its sales goal,” after first half sales that were more than halfway to the full-year target, said Sokje Lee, an analyst at Mirae Asset Securities Co. in Seoul. “New models are lifting sales in every market and the growth should continue.”
To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net
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