With the global semiconductor crisis slowing down vehicle production and consequently sales, Hyundai Motor Co. of South Korea marginally missed analysts’ profit projections for its latest completed quarter.
While announcing the quarterly results, the company also said that it expected it will take a long time for the global chip supply shortage to normalize.
A net profit of 1.3 trillion won ($1.10 billion) for the July-September quarter was reported by Hyundai, which ranks among the world’s top 10 manufacturers by sales when combined with its affiliate Kia Corp.
A loss of 336 billion won was reported by the company for the same period a year ago when its financials were impacted by a one-time charge linked to engine quality issues and recalls.
The quarterly profits were just short of Refinitiv SmartEstimate’s average analyst projection of 1.4 trillion won.
“Hyundai Motor expects that on-year sales growth might slow down for the rest of 2021 amid adverse business conditions caused by the unstable supply of semiconductor chips,” Hyundai Motor said in a statement.
It would not be until the end of this year or early next year that the global chip shortage would continue to have an impact, the automaker said, and said that it expected the crisis to take quite a long time to get back to normal.
“The chip shortage will likely continue into the fourth quarter but supply conditions would partially improve in the fourth quarter compared with the third,” Hyundai Motor’s Executive Vice President Seo Gang Hyun said in a call with analysts.
Globally, auto companies have been forced to reduce production and delivery predictions because of the global chip crisis, which was sparked in part by a sudden surge in demand for laptops and consumer electronics during the pandemic as people were forced to stay back home and work and study from home.
The year on year sales of Hyundai for the second half of 2021 was previously predicted by the company to decrease because of adverse business conditions, such as the insecure supply of automotive semiconductors.
In order to better adapt to uncertainties, such as the coronavirus pandemic, the company said that it had cut down on capital expenditure expenditures this year by more than 10 per cent to 8 trillion won.
The South Korean auto maker also raised its operating profit margin forecast for its auto-business for this year from between 4 per cent to 5.5 per cent to 4.5 per cent -5.5 per cent, as it cited robust sales of its high-margin sport-utility vehicles (SUVs) and premium Genesis cars.
“Based on Hyundai’s revision of its operating margin targets, the upcoming fourth quarter results would likely mark the most profitable quarter this year as the company seems to expect that the chip supply issues would likely improve,” said Lee Jae-il, analyst at Eugene Investment & Securities.
In the April-June quarter, Hyundai posted its biggest quarterly profit in almost six years, thanks to its conservative supply chain management, which enabled it wade through the difficult global chip shortage better compared to other rival auto companies.
However, the company was forced to halt manufacturing in the third quarter due to the prolonged crisis.
In order to lessen dependency on third parties, Hyundai intended to build its own semiconductors, the company’s global chief operating officer, Jose Munoz, stated earlier this month.
After the company released its financial results, Hyundai Motor’s stock rose 0.7 per cent, compared to a 0.8 per cent rise in the broader market KOSPI
(Adapted from ChannelNewsAsia.com)