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Hyundai Motor headquarters in Seoul. (Hankyoreh archives)

Hyundai Motor suffered another earning shock as its operating profits for the fourth quarter of 2018 fell below the 500 billion won (US$444.6 million) mark. Total operating profits earned by the company in 2018 also dipped below 2 trillion won (US$1.78 billion). The amount was less than half the automaker’s earnings the year before, and its poorest performance since the 2010 adoption of International Financial Reporting Standards (IFRS).

In a Jan. 24 conference call, Hyundai Motor announced sales of 97.25 trillion won (US$86.47 billion) and operating profits of 2.42 trillion won (US$2.15 billion) for last year. Sales earnings were up 0.9% from 2017 amid an increase in units shifted, but operating profits were down by 47.1%. The operating profit ratio was down 2.2 percentage points to 2.5%.

The decrease in profitability despite a small rise in sales volumes and earnings is being attributed chiefly to declining conditions for the world’s two biggest markets, China and the US, as well as a drop in currency value and increased marketing costs.

“Despite improved sales volumes in the automobile sector thanks to new model launches, profitability declined amid an increase in the cost-to-sale ratio due to external factors such as the falling won-to-dollar exchange rate and intensifying bear market for currency in emerging economies, along with declining profitability in other areas and an increase in investment costs to boost future competitiveness,” a Hyundai Motor official said.

Coming on the heels of another decline in performance for the third quarter, the fourth quarter earning shock is fanning market concerns. Hyundai Motor’s fourth quarter sales of 25.67 trillion won (US$22.82 billion) were up 4.8% from the same period in 2017, but operating profits were down by 35.4% to 501.1 billion won (US$445.54 million). The fourth quarter operating profits fell far below the market’s average projection of 700 billion won (US$622.42 million).

Hyundai Motor predicted it would continue to find itself in a difficult environment this year. Uncertainty is expected to increase as low growth persists amid a slowdown in global economic growth, including the current US-China trade frictions and slowdown in the Chinese economy.

Hyundai Motor plans to attempt to bounce back this year through aggressive targeting of markets with new models. Its Palisade large-size SUV has drawn praise since its late 2018 launch, and the first new model of its marquee mid-size Sonata in five years is to be unveiled around March. The company announced a 2019 sales target of 4.68 million vehicles, including 712,000 domestically and 3,968,000 overseas.

By Hong Dae-sun, staff reporter

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