Hyundai Motor profit drops 52.3 percent in Q2

Hyundai Motor's operating profit dropped by 52.3 percent year-on-year in the second quarter. [YONHAP]

Hyundai Motor's operating profit in the second quarter more than halved on year as demand slowed and factories were temporarily shuttered due to the coronavirus pandemic.

The earnings report was partially salvaged by solid sales growth in the domestic market.

Hyundai Motor, Korea's No. 1 carmaker by sales, posted an operating profit of 590.3 billion won ($493 million) in the second quarter, a 52.3 percent year-on-year drop.

Its net profit recorded 377.3 billion won, a 62.2 percent on-year drop.

By sales unit, Hyundai Motor sold 703,976 units of cars in the global market, 36.3 percent less than it sold in the second quarter of last year.

While its overseas sales plunged by a whopping 47.1 percent, however, the carmaker's domestic sales were up by 12.7 percent during the same period.

“Restrictions derived from Covid-19 and factory shutdowns have lead auto demand to drop drastically compared to the second quarter last year, resulting in a big drop in sales and operating profit” said Hyundai Motor in a release on July 23.

“However due to the favorable exchange rate conditions due to weak Korean won and the Korean government’s extension of a cut in consumption tax, the company could combat the negative impact by a small margin.”

By region, India saw the biggest drop in sales of Hyundai Motor cars, posting a 65.8 percent year-on-year drop in the second quarter, followed by Brazil with 55.8 percent and Africa and the Middle East with 53.5 percent.

The United States showed a 24.1 percent drop and Western Europe a 56.9 percent drop on year.

Sales of Hyundai Motor vehicles in China also dropped by 20.3 percent in the second quarter on year.

Business conditions in the second quarter are unlikely to be much more favorable, especially with developing countries expected to show slow or no recovery in handling the economic fallout derived from the virus.

Hyundai Motor plans to counter the different conditions with new car launches and a fortified digital platform.

In India, where Hyundai Motor holds the biggest share of the car market, it will expand the supply of Creta and Venue cars, two SUV models, and newly launch an upgraded i20. It said it would also expand operations of its digital platform where consumers can purchase cars online.

In the United States, where demand is slowly recovering, Hyundai Motor will launch its premium lineup including the G80 and GV80 in the latter half of this year to improve profitability. It will also launch models like the Avante small sedan.

"Along with the lineup strategy, Hyundai Motor will invest in local dealerships and fortify the online sales platform in order to improve the brand competitiveness in the long term," said Kim Sang-hyun, chief financial officer at the company.

Hyundai Motor, which didn't pay interim dividend to its shareholders this year, said the annual year-end dividend payment could also be canceled.

"Uncertainty still remains in the latter half of this year, so we will go over whether to distribute the annual dividend after mulling over the market condition and the company's profitability and investment strategy," Kim said.

Hyundai Motor shares closed at 124,500 won on July 23, up 5.06 percent.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]