Hyundai Reports Biggest Net Profit Gain in 7 Years
South Korean carmaker Hyundai Motor published its financial results for the second quarter of this year. The company saw the largest quarterly profit increase in seven years. The performance was driven by sales at home and in the US.
Hyundai Notes Double-Digit Growth in Profit
In the second quarter of the year, South Korea’s biggest carmaker reported that its operating profit rose 30.2% compared to the same period in 2018. This is the largest growth in operating profit in two years. The increase sale of sport utility vehicles (SUV) was the main driver behind the growth. Thus, the company’s operating profit figure touched 1.24 trillion won, which is equivalent to $1.05 billion. Analysts expected a reading at about 1.1 trillion won or $930 million.
Besides the demand for SUVs, Hyundai benefited from the depreciation of won against the US dollar.
The company’s quarterly revenue increased 9.1% year-on-year to 26.97 trillion won ($22.9 billion) while net income surged 23.3% to 999.3 billion won ($848.3 million).
The carmaker saw its net profit increasing by 31.2% for the quarter, to 919.3 billion won ($780 million). Even though it didn’t reach analysts’ expectations, the net profit showed the biggest gain since 2012.
During the three months through June, Hyundai sold 1,104,916 cars, down 7.3% compared to the same period in 2018. The decline was caused by weak demand from China, the US, and other major markets.
In the first half of 2019, the company’s revenue jumped 8.1% year-on-year to 50.95 trillion won ($43.3 billion). Operating profit surged 26.4% compared to the first half of 2018, to 2.06 trillion won ($1.75 billion).
Hyundai Bets on US Market
While reporting its quarterly results, Hyundai also presented some forecasts related to the global and US market. The company said it intends to expand its range of SUVs in the US. Hyundai expects the share of its American market to start increasing again from this, aiming for a share of 4.2% compared to 3.9% in 2018. The carmaker hopes the US market to have a share of 5.2% by 2023.
The US is the largest overseas market for Hyundai, and, in order to maintain its visible presence there, the company wants to increase the proportion of SUVs to 67% by 2023. Today, only half of the Hyundai cars in the US are SUVs.
Kim Joon-sung, analyst at Meritz Securities, commented:
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.
The strong performance in the US and at home helped Hyundai offset a decline in revenue in China, whose economy is slowing down because of the trade war with the US. The Korean automaker suspended production at one of its factories in China.
Hyundai stock fell 1.1% after the announcement, mainly because of a general bearish sentiment in the stock markets.
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