Hyundai Motor logs biggest profit gain since 2012 on currency, new models

  • Analysis
  • 22-July-2019

South Korea’s Hyundai Motor Co. announced on Monday its quarterly net profit gain. It was the steepest gain since past seven years. The boost in the domestic sales of newly launched models along with the weaker local currency led to the lift in the U.S. income leading to this solid performance.

The sales slump in China impelled the Company to suspend its production due to slowing economy, United States Trade War and lack of competitive models. Hyundai’s oldest factory was closed April earlier this year.
The company is also expecting a South Korean labor union potential strike which would impact its earnings due to supplies wavering for models like Palisade Sport both at home as well as overseas, as analysts foresees.

The April-June net profit rose 31.2% to 919.3 billion won ($780.44 million) – this is the biggest percentage gain since the 1st Quarter of the year 2012. Operating profit moved from 30.2% to 1.24 trillion won while revenue increased from 9.1% to 26.97 trillion won, the Company said in a stock exchange filing.

Euisun Chung, the executive Vice Chairman and a probable heir, has been handling profit recovery post six years crash. The steepest currency decline of 5.5% drop in the won value against U.S. dollars has led to the high earning in this quarter. This has also made South Korean exports more competitive with regards to overseas pricing.

The company also benefitted with the 8.1% jump in home sales for new models such as the Palisade SUV and Sonata sedan. The company plans to target United States to sell its new Palisade SUV due to the U.S. consumer inclination towards SUVs. As per the recent report Global SUV Market 2018 by Manufacturers, Regions, Type and Application, Forecast to 2023 by the worldwide SUV market is expected to grow high CAGR anticipating high sales volume.

Though the progressive plan might be threatened due to an anticipated strike by Hyundai’s South Korean union after, they walked out of the annual wage talks on Friday.

If this dispute is not curbed quickly, it may hamper the sales and earnings for this year as sales are at good pace - Samsung Securities analyst Esther Yim said in a recent report.