April 24, 2019
By Hyunjoo Jin
SEOUL (Reuters) – South Korea’s Hyundai Motor reported a better-than-expected 24 percent jump in net profit for the January-to-March quarter, as improved business at home and the United States helped offset weaker sales in China.
The rise in profit, from an eight-year low hit a year ago, comes after Hyundai recently flagged plans to suspend production at its oldest plant in China as it grapples with massive overcapacity in its biggest market.
Hyundai posted a first-quarter net profit of 829 billion won ($721.81 million), versus 668 billion won a year earlier. This was above an average estimate of 758 billion profit from 15 analysts, according to I/B/E/S Refinitiv data.
Its operating profit rose 21 percent to 825 billion won, while its revenue was up 7 percent to 23.99 trillion won.
Its first-quarter sales in China slumped 19 percent to its lowest since the global economic downturn in 2009, dragged by the lack of attractive models and strong branding amid growing competition from local and global rivals.
An overall slowdown in auto sales in China in the first quarter after contracting in 2018 for the first time in almost three decades weighed further on Hyundai’s sales in the country, home to the world’s biggest car market.
In contrast, Hyundai’s sales in South Korea rose 9 percent to its highest since 2002 in the first quarter, with its new Palisade large SUV selling better than expected, even as its rivals from General Motors and Renault to Mercedes Benz and BMW struggled with falling sales.
In the United States, the world’s second-largest car market where Hyundai is slowly catching up with the shift to sport utility vehicles, the automaker’s sales rose 2 percent.
Just last week, Hyundai hired former Nissan executive Jose Munoz to oversee its Americas operation, replacing William Lee, who has held the position for less than a year.
The appointment comes at a time when Hyundai and affiliate Kia Motors, together the world’s the fifth-biggest automaker, are facing regulatory investigations in the United States into the timeliness of recalls involving defective engines and thousands of fires connected to their vehicles.
A threat of import tariffs has further blurred the outlook for their U.S. sales.
U.S. President Donald Trump, who has threatened to levy tariffs of some 25 percent on imported vehicles and auto parts on national security grounds, has until about May 17 to act on any tariff recommendations made by the Commerce Department.
South Korean government officials said the country could be exempt from the tariffs as Seoul has made concessions in autos under a revised trade deal with Washington.
But Hyundai CEO Ha Eon-tae cautioned union leaders earlier this month that tariffs, if imposed, could wipe off two of the automaker’s South Korean factories, according to a union newsletter on its website.
Hyundai has one factory in the United States and around half of its vehicles sold in the United States comes mainly from South Korea and Mexico.
Hyundai shares rose 1.5 percent after the results, outperforming the wider market’s 1.3 percent fall.
(Reporting by Hyunjoo Jin; Editing by Himani Sarkar)