Hyundai Motor profitability slips

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Hyundai Motor profitability slips


Hyundai Motor’s profitability declined in 2013 despite an increase in overseas sales.

Hyundai said yesterday in a regulatory filing that sales revenue last year reached 87.3 trillion won ($81 billion), up 3.4 percent from a year ago, while operating profit declined 1.5 percent year-on-year to 8.31 trillion won. Net profit also plunged 0.7 percent year-on-year to 8.99 trillion won last year.

“With good sales in overseas market like China and the United States and more companies included in our consolidated basis accounting, our sales have increased, but the operating profit declined due to a slump in domestic market sales and production disruptions at local plants,” Hyundai said in a release.

The automaker sold 4,732,366 vehicles worldwide last year, up 7.3 percent from 2012. However, domestic sales declined 4 percent year-on-year to 640,698 units.

Hyundai operating profit-to-sales ratio in 2013 dipped below 10 percent for the first time in three years at 9.5 percent. The ratio was 10.3 percent in 2011 and 10 percent in 2012.

“Fluctuating currency rates, worsened productivity at local plants, rising labor costs and reserves to cover recalls in the first quarter were major factors for the operating profit decline,” the company said.

For the fourth quarter of 2013, Hyundai had sales of 21.93 trillion won, down 3.4 percent from the previous year, and operating profit of 2.03 trillion won, up 10.8 percent. However, its operating profit ratio in the fourth quarter was 9.3 percent, compared to 10.4 percent in the second quarter and 9.7 percent in the third.

This year, Hyundai’s goal is to sell 4.9 million vehicles worldwide, up 3.5 percent from last year. The automaker said it will focus on internal stability based on quality growth and future competiveness.

The company expects aggressive moves from Japanese automakers backed by the weak yen. Lee Won-hee, Hyundai’s chief financial officer, expects the average yen-dollar exchange rate to be 107 this year.

He said that since Japanese automakers, excluding Toyota, also rely on overseas production, the direct impact of the weak yen could be limited but could boost their profitability.

“Although they might not pursue price discounts or increase incentives, we are concerned they can look to increase sales by putting more money in marketing,” Lee said. “There is also concern Japanese companies can invest more money on R&D, so that’s why we are also planning to reinforce our R&D investment, too.”

Lee added that the company sees the average won-dollar exchange rate this year to be 1,060, but for its 2014 business plan it has figured 1,050 won per dollar and plant operation at 100 percent, compared to 105 percent in 2013.

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