Hyundai’s profits keep on slipping

Hyundai Motor’s brand slogan is displayed next to one of its vehicles exhibited at the company’s headquarters in Gangnam District, southern Seoul. [NEWSIS]

Hyundai Motor announced on Thursday that it will pay interim dividends for the first time, hoping to dispel shareholders’ worries about the company’s disappointing performance and aggressive investments that have depreciated share value.

On the same day, the automaker announced its second quarter performance, which reported that operating profit has been falling for five consecutive quarters. Net profit has been falling for six consecutive quarters.

The nation’s leading automaker said it will pay 1,000 won in interim dividends per share, totaling about 268.6 billion won ($231.4 million).

“The average payout ratio by global automakers is 25 to 30 percent,” said Lee Won-hee, the chief financial executive of Hyundai Motor.

“We will try to improve the current [10 percent] payout ratio to the global level, but will first raise the figure to 15 percent, which is the average for domestic listed companies. The details for the dividend will be decided in a board meeting later.”

The company has been considering paying an interim dividend since the third quarter. One of the biggest reasons was to soothe shareholders who had to see the company’s average share value plummet after its decision to purchase land owned by the Korea Electric Power Corporation (Kepco) in Samseong-dong, southern Seoul, for 10.5 trillion won to build a new car business hub, including a 115-story headquarters.

Hyundai Motor’s shares were valued at 260,000 won last year, but are now being traded at the 130,000 won level. The company traded at 138,000 won per share Thursday, a 5.34 percent rise from the previous session, thanks to the dividend payout decision.

Recent poor performances in both the domestic and export markets also forced the company to make the decision. In the score sheet for this year’s first half, announced the same day, the company said revenue through June dropped by 1.4 percent from a year earlier to 43.76 trillion won, while operating profit dropped by 17.1 percent from a year ago to 3.33 trillion won.

The company said the figures were due to slow growth in the global auto market and unstable currency values in newly industrialized nations, adding it is hard to predict the second half because of the stagnant recovery of the global economy.

“The global auto market is only expected to grow about 1.2 percent this year, the lowest since 2009,” the company said. “It is because the economies in newly industrialized nations, including China, Russia and Brazil, are struggling. When the currencies of those nations plunged, competition with our Japanese and European rivals got tougher.”

The company said it will introduce a series of new cars in the second half to stimulate a rebound. In Korea, the company already has expanded its lineup for its best-selling Sonata sedan by adding turbo and diesel engine models.

The company said it will also introduce more environmentally friendly cars to the local market.

In the export market, the company will start selling its new Tucson SUV in the United States, Europe and China - the automaker’s major markets - and will introduce the small Creta SUV in India, Latin America and the Middle East as soon as possible to meet growing demand for SUVs.

Meanwhile, the nation’s smallest automaker, Ssangyong Motor, enjoyed growth in its domestic sales. It sold 45,410 cars in the first half, a 36.6 percent rise year-on-year and the most since 2004, when it sold 54,184 units due to the success of its best-selling Tivoli SUV.

But the company’s celebrations didn’t last long, as its year-on-year balance sheet declined. The company reported 1.59 trillion won in revenue in the first half, a 7.7 percent drop year-on-year, and an operating profit of 54.1 billion won, a whopping 228 percent decline year-on-year.

One of the biggest reasons for the struggles was poor performance in the global market caused by a slumping economy in the newly industrialized nations, including Russia, which was one of the company’s biggest export markets, and a weak euro.

The company only sold 24,390 cars globally in the first half, a 40.5 percent drop from a year earlier.

“We expect the export figures to improve, as we started selling the Tivoli SUV in Europe and China since June,” said the company’s CEO Choi Johng-sik.

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr ]