Hyundai Posts 92.0% Y/Y Rise in Net Profit During January-September

South Korea's largest automaker, Hyundai, has announced its financial results for the first nine months of 2010, showing its net profits have increased almost 92.0% year-on-year (y/y). For the nine months ending 30 September 2010, the automaker posted a net profit of 3.9 trillion won (US$3.4 billion), compared with a 2.0 trillion won net profit during the same period of last year. Operating profit during the reporting period stood at 2.3 trillion won, up almost 65.8% y/y, while pre-tax profits increased 83.1% y/y during the period to 4.7 trillion won. Meanwhile, sales revenues at the company grew by 20.8% during the January-September period to 26.8 trillion won. Hyundai reported almost 12.5% y/y increase in its sales volume of domestically produced vehicles during the January-September period, to 1.276 million units. The company said in a statement that, "For the first three quarters of the year, the company marked a profit rate of 8.6% with its ordinary profit rate coming to 17.5% on improved profitability of its key overseas plants and units in the United States and China."

Hyundai's outstanding financial performance during the first nine months of 2010 was partially thanks to better-than-expected earnings during the third quarter of 2010 despite higher base of comparison and unfavourable currency translation effects. Hyundai's posts 38.2% y/y increase in its net profits during the three months ending 30 September 2010 to 1.4 trillion won, while, its operating profit increased 28.2% y/y during the reporting period to 751.8 billion won. Sales revenues at the company increased 9.2% during the quarter to 8.8 trillion won. Hyundai chief financial officer (CFO), Lee Won-hee, said that, "Robust sales in overseas plants in the U.S. and China surged and expanded sales of mainstay products, such as the Sonata and Avante sedans, will continue to bolster profitability."

Outlook and Implications

Hyundai has emerged as one of the best-performing automakers globally during the year so far, led by its well-integrated product mix and strong promotional measures highlighting its value-for-money offerings. The automaker attributed strong profitability during the January-September period to increased utilisation rates of its worldwide facilities, improved product mix, and stronger won against major other global currencies that helped lower costs of its overseas after-sales service. These factors helped the company partially offset higher input costs, unfavourable currency translation effects, and effects of fewer workings days in September due to the Chusok holidays.

Hyundai has been witnessing significant recovery in its sales volumes over the last several months, with exceptions in South Korea of late. The automaker launched several new and upgraded models in its domestic and overseas market so far in 2010, including the new Avante/Elantra subcompact car and its liquefied petroleum injection (LPI) hybrid version (see South Korea: 28 July 2010: Hyundai to Launch New Avante Subcompact in South Korea Next Month, Set to Begin Exports Soon). Hyundai is also planning to launch a series of new and revamped models in the domestic market during 2010. These include an electric version of its i10 compact car, the all-new Grandeur luxury sedan, and the liquefied petroleum gas (LPG)-powered Avante sedan. The company aims to achieve a domestic passenger car market share of 52% for the full year 2010 and believes that the addition of the new and revamped models will help it achieve its target.

Hyundai recently unveiled its—and South Korea's—first full-speed electric vehicle (EV), called the BlueOn (see South Korea: 09 September 2010: Hyundai Unveils Its First EV). The model is part of Hyundai's strategy to strengthen its position in the domestic and global market in light of the changing business environment and increasing consumer and business preference for environmentally friendly and fuel-efficient cars. As part of its push to make cars greener and reduce their impact on the environment, Hyundai has adopted the word "Blue" as its environmental trademark, in line with many other vehicle manufacturers. Hyundai is also attempting to strengthen its worldwide position by expanding its customer base across the major segments in strategically important markets (see China: 22 October 2010: Hyundai Announces CV Venture in China with Ziyang Nanjun Auto and India: 29 September 2010: Hyundai India Plans to Launch New Models in Bid to Increase Market Share). The automaker is currently also establishing an auto component base and new facility in China in a bid to improve its share of the world's largest vehicle market (see China: 14 September 2010: Hyundai, Kia Plan Third Facility in China). Further support for Hyundai should come from its recently secured wage agreement with its labour union in South Korea, ensuring a second consecutive strike-free year in 2011.

However, the company is concerned about the recent strengthening of South Korean won against other global major currencies, as it exports almost 65% of its domestic production to overseas markets. The South Korean won ended the third quarter at an average of 1,185.6 won:US$1, up from an average of 1,240.9 won:US$1 during the third quarter of 2009 which, if it continues to strengthen, could further erode overseas profits at the company. Hyundai CFO Lee Won-hee said that the company will set up business plans based on an exchange rate of 1,100 won:US$1 for 2011.