It is understood that Hyundai Motor Company’s operating profit in 2016 will decrease by more than 10% compared to its operating profit in 2015 due to low sales and high expenses. On the other hand, Kia Motors, Hyundai Mobis, and Hyundai Glovis are expected to have positive performance in 2016. Major subsidiaries of Hyundai Motor Company are going to announce their fourth quarter performances on the 25th of this month.
According to stock industries and Hyundai Motor Company’s performance consensus (based on FN Guide) on the 19th, it is estimated that Hyundai Motor Company made $79.9 billion (93.9256 trillion KRW) and $4.80 billion (5.6363 trillion KRW) in sales and operating profits respectively in 2016. These are values that are added with $21.1 billion (24.8174 trillion KRW) and $1.23 billion (1.4471 trillion KRW) in sales and operating profits respectively for fourth quarter of 2016.
Although its entire sales increased in 2016, its operating profits decreased by 11.3% from $5.41 billion (6.3579 trillion KRW) to $4.80 billion (5.6363 trillion KRW). Although its sales volume recovered during fourth quarter from reduction of sales volume during third quarter, its profitability was not able to improve.
It is estimated that its operating profits for fourth quarter decreased by 4.5%. There are predictions that Hyundai Motor Company’s actual performance will be even worse as observation values decreased by 6.1% more than estimated values that were made 3 months ago. It is seen that Hyundai Motor Company’s operating profits in 2016 will be lower than operating profits in 2015 due to increase in fixed cost for increased marketing cost and strikes of launching of Genesis brand.
It is estimated that Kia Motors made $45.3 billion (53.1849 trillion KRW) and $2.15 billion (2.5279 trillion KRW) in sales and operating profits respectively in 2016 and $11.5 billion (13.4832 trillion KRW) and $505 million (593 billion KRW) in sales and operating profits respectively in fourth quarter of 2016. Its operating profits in 2016 increased by 7.4% compared to its operating profits in 2015. Kia Motors believes that it was not able to meet its initial expectations due to increased cost from operation of its factories in Mexico.
Hyundai Motor Company and Kia Motors have to increase their investments in this year again due to protectionism from the U.S., increase in number of new vehicles, and development of eco-friendly vehicles. Hyundai Motor Company recently announced that it will invest $3.1 billion within the U.S. for next 5 years. To this amount, it also needs to invest into development of future vehicles such as self-driving cars, connected cars, and eco-friendly cars. If it does not rapidly increase percentage of sales of luxury cars and SUVs that can increase profits, it will be inevitable for Hyundai Motor Company’s operating profits to decrease once again.
Hyundai Motor Company’s subsidiaries that are responsible for vehicle components and distributions are continuously making positive performance contrast to automotive manufacturers. Hyundai Mobis’ sales and operating profits have both increased due to increase in sales of SUVs from Hyundai Motor Company and Kia Motors. It is estimated that it made $32.6 billion (38.2553 trillion KRW) and $2.64 billion (3.0981 trillion KRW) in sales and operating profits respectively in 2016 and they increased by 6.2% and 5.6% respectively compared to previous year. Hyundai Glovis’ operating profits in 2016 increased by 10.4% compared to previous year due to operation of Kia Motors’ factories in Mexico and positive factors in CKD (Complete Knock Down) sector despite decrease in exports of vehicles from Hyundai Motor Company and Kia Motors.
Hyundai Wia predicts that its fourth quarter performance will decrease greatly as it was not able to respond to engines with 1600cc or lower that can receive tax benefits from China.
Staff Reporter Mun, Bokyeong | okmun@etnews.com
