Hyundai Motor second-quarter net profit rises 31.2%, new models boost domestic sales
Reuters
Published Jul 22, 2019 04:53AM ET
Hyundai Motor lays out U.S. recovery plan, places hope on new SUV models
By Ju-min Park and Hyunjoo Jin
SEOUL (Reuters) - South Korea's Hyundai Motor Co (KS:005380) laid out its U.S. sales turnaround plan on Monday with an expanded line-up of sport-utility vehicles (SUV), after posting its biggest quarterly profit jump in seven years.
The automaker forecast its U.S. market share to begin rising again from this year, targeting a year-end share of 4.2% versus 3.9% last year, with sales of its upgraded Palisade SUV starting from the second half. It aims for a U.S. share of 5.2% by 2023.
Solid performance at home and in the United States in the three months through June helped offset a sales slump in China, where a slowing economy, trade war with the United States and a lack of competitive models prompted the automaker to suspend production at its oldest factory earlier this year.
To maintain momentum in the United States - its biggest overseas market - Hyundai said it plans to boost the proportion of SUVs in its U.S. line-up to 67% in 2023 from 51% in 2019, as it works to catch up with a shift in consumer preference.
"It was a surprise when Hyundai revealed an aggressive U.S. turnaround plan, but I don't see any problem in it meeting its annual sales target there," said analyst Kim Joon-sung at Meritz Securities.
Hyundai's revival is being led by heir-apparent Euisun Chung following six years of profit decline. The executive vice chairman is widely considered to be seeking investor support to revisit an ownership restructuring plan as he prepares to take over from his 81-year-old father and chairman.
A previous proposal was scrapped last year following shareholder opposition, notably from U.S. hedge fund Elliott Management Corp.
Since last year, Chung has brought in a flurry of foreign executives in a sweeping reshuffle at a firm dominated by Koreans. Most recently, in April, it appointed an ex-ally of Nissan Motor Co Ltd's (T:7201) ousted Chairman Carlos Ghosn as global chief operating officer and Americas chief.
In the April-June period, U.S. sales gained 3% while a weak Korean won against the U.S. dollar raised the value repatriated income. At home, new models such as the Palisade SUV and Sonata sedan helped sales jump 8.1%.
Overall, net profit for the quarter rose 31.2% to 919.3 billion won ($780.44 million), just short of market estimates but still Hyundai's biggest quarterly percentage gain since the first quarter of 2012.
Operating profit rose 30.2% on a 9.1% increase in revenue, the automaker said in a stock exchange filing.
Even so, the earnings recovery could weaken as Hyundai braces for a potential strike by its domestic labor union that could disrupt supplies of models such as the Palisade both at home and overseas, analysts said.
Get The News You Want
The union will vote next Monday whether to approve strike action after walking out of annual wage talks on Friday.
A prolonged dispute could have a greater impact on sales and earnings this year because, unlike in the past three or four years of slow growth, sales of its new models have been brisk, Samsung (KS:005930) Securities analyst Esther Yim said in a recent report.
Hyundai stock closed down 1.1% after the earnings announcement, versus the broader market's (KS11) 0.1% fall.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.