Hyundai Motor's Q3 operating profit rises 5.5% despite external challenges
Hyundai Motor headquarters in Seoul / Courtesy of Hyundai Motor
Operating profit reaches $2.05 bil., while sales fall 3.4% to $33.6 bil.
Hyundai Motor posted modest growth in its operating profit for the third quarter, as stronger sales of higher-value vehicles, particularly hybrids, and favorable exchange rates helped offset production disruptions and weaker global demand, the carmaker said Thursday.
In a regulatory filing, the automaker reported its operating profit grew by 5.5 percent between July and September to 2.68 trillion won ($2.05 billion), while its sales fell 3.4 percent to 45 trillion won during the same period.
The carmaker managed to weather market concerns to some extent with the earnings growth, as the market expected it to continue its losing streak due to multiple risk factors, such as domestic production disruptions caused by labor strikes and deepening competition around the world.
Hyundai Motor attributed the profit increase to favorable exchange rates, cost optimization measures and an improved sales mix driven by growing demand for hybrids. The average won-dollar exchange rate rose 2.8 percent from a year earlier to 1,423 won during the third quarter.
Hyundai Motor's best-selling Tucson SUVs / Courtesy of Hyundai Motor
Hybrids accounted for 18.2 percent of the company's global vehicle sales, up 2.7 percentage points from a year earlier. The company sold 167,414 hybrids, excluding plug-in hybrids, during the quarter, an increase of about 6,000 vehicles from the same period last year.
The stronger hybrid performance helped cushion the impact of declining sales of other electrified vehicles. Hyundai Motor's total electrified vehicle sales, including hybrids, electric vehicles (EVs) and plug-in hybrids, fell 2.7 percent to 245,540 vehicles.
By region, domestic sales fell 27.2 percent to 131,468 vehicles, reflecting production disruptions caused by labor strikes. Overseas sales declined 8 percent to 789,242 amid weaker global demand and export disruptions.
Despite the increase in operating profit, Hyundai Motor faces continued pressure from rising raw material costs and tariffs from the United States.
The automaker expects external uncertainty to persist amid geopolitical tensions, intensifying competition and elevated raw material prices. It also anticipates continued pressure from U.S. tariffs, which have weighed on the operating environment for Korean automakers.
Hyundai Motor lowered its full-year operating profit-to-sales ratio target to between 5.5 percent and 6.5 percent, from its previous range of 6.3 percent to 7.3 percent. It also cut its annual sales target to 4 million vehicles from 4.16 million.
The company maintained its full-year sales growth target of 1 percent to 2 percent.
Hyundai Motor plans to recover sales in the fourth quarter through increased production, the full-scale rollout of new models and further improvements in its vehicle mix, the company said. Domestic production began returning to normal in September, providing a foundation for higher output in the final quarter, Hyundai Motor said.
"Hyundai expects increased sales of the new Avante and Tucson models, as well as the Genesis GV90, alongside a more favorable product mix following the launch of the GV80 Hybrid SUV," Lee Seung-jo, executive vice president at Hyundai Motor, said during a conference call.
"The company will also work to minimize cost pressures and improve profitability by reducing incentives in line with new model launches."
Despite the weaker outlook, Hyundai Motor reaffirmed its commitment to shareholder returns, setting its third-quarter dividend at 2,500 won per share. The dividend is scheduled to be paid on Dec. 30.