This is offset by a decrease in the number of vehicles sold and sales of high value-added vehicles.
Difficult business environment expected in 2Q, but guidance for this year remains the same
▲Hyundai Motors ‘IONIQ 5’ (provided by Hyundai Motor Company)
Hyundai Motor Company recorded good results that exceeded market expectations despite adverse factors such as a continued shortage of semiconductors.
Hyundai Motor Company announced its business results for the first quarter of 2022 in Yangjae-dong, Seocho, Seoul on the 25th. In the first quarter, it recorded 30.2986 trillion won in sales and 1.9289 trillion won in operating profit. Compared to the same period of the previous year, the growth rates reached 10.6% and 16.4%, respectively.
All of these were above market expectations. Ahead of the earnings announcement, the market predicted that Hyundai Motor’s sales in the first quarter of this year would reach 29.1 trillion won, an increase of 6.1% from the previous year. The operating profit is expected to decrease by 0.1% compared to the previous year, expected to be 1.66 trillion won.
In fact, the number of vehicles sold has decreased. Hyundai Motor Company announced that in the first quarter of this year, global vehicle wholesale sales fell 9.7% from the same period last year to 92,945 units.
In the domestic market, sales of IONIQ 5 and new Genesis cars were good, but sales of 152,098 units decreased by 18.0% compared to the previous year due to a shortage of semiconductors and parts due to the blockade of some parts of China. Overseas market sales also recorded 775,847 units, down 7.8% from the previous year due to production disruptions due to a shortage of semiconductors.
Sales increased by 10.6% despite the decrease in the number of vehicles sold, as sales focused on high value-added models such as Genesis and SUVs and favorable exchange rates offset the decrease in vehicle sales. For the same reason, the COGS-to-sales ratio also fell to 80.9%, down 0.7 percentage points from the same period last year. However, the ratio of sales and administrative expenses to sales recorded 12.7%, a 0.4% increase from the previous year due to increased marketing and investment costs.
As a result of the improvement in performance despite the decrease in the number of units sold, Hyundai Motor’s operating profit in the first quarter of this year increased by 16.4% in the same period of the previous year, exceeding the market’s expectation that the operating profit would decrease. The operating profit margin was 6.4%, and ordinary profit and net profit were 2.2786 trillion won and 1.7774 trillion won, respectively.
Regarding the business performance in the first quarter of 2022, a Hyundai Motor official said, “Sales in the first quarter decreased compared to the same period last year due to the continued impact of a production shortage due to disruptions in the supply of global automotive semiconductors and other parts. It has increased compared to the same period last year as the favorable exchange rate effect was added to the improvement of the sales mix and regional mix centered on developed countries,” he explained.
Hyundai Motor predicted that the global pandemic would subside, the semiconductor shortage would stabilize, and the business environment would improve. However, he predicted that the difficult business environment would continue as uncertainties such as continued imbalance in supply and demand for parts due to China’s city blockade and a surge in raw material prices due to geopolitical risks would continue. Rising marketing costs due to increased exchange rate volatility and intensified competition among companies were also cited as burdensome factors.
Hyundai Motor Company decided to maintain this year’s growth rate as presented in the ‘2022 Annual Performance Guidance’ announced earlier. In January, Hyundai Motors proposed a target for this year’s consolidated sales growth rate of 13-14% compared to the previous year and operating profit margin of 5.5-6.5%.
A Hyundai Motor official said, “The second quarter is expected to be difficult due to the full-fledged impact of rising raw material prices and geopolitical risks.