SEOUL, Oct. 28 (Korea Bizwire) — Hyundai Motor Co. and its affiliate Kia Motors Corp. are expected to report a combined operating profit of about 3 trillion won (US$2.7 billion) in the fourth quarter on new models and improved product mix, after delivering poor business results in the past quarter, analysts said Wednesday.
Hyundai and Kia look set to post more than 1.8 trillion won and over 1 trillion won, respectively, in operating profit for the October-December period after hefty provisions for the recall of a faulty engine and other quality-related expenses cut into the third-quarter bottom line, according to them.
In the third quarter, Hyundai shifted to an operating loss of 313.8 billion won from an operating profit of 378.5 billion won a year ago and Kia’s operating profit plunged 33 percent to 195.23 billion won from 291.47 billion won during the same period after putting aside 3.4 trillion won in provisions.
In the fourth quarter, they expected the country’s two biggest carmakers will benefit from new models, such as Hyundai’s Tucson SUV and the upcoming Genesis GV70 SUV, as well as Kia’s Sorento SUV and the Carnival minivan despite the COVID-19 pandemic.
“Lack of such massive one-off costs and strong sales of Hyundai’s and Kia’s SUV models in the domestic and advanced markets will help buoy their fourth-quarter earnings,” Yoo Ji-woong, an analyst at eBEST Investment & Securities Co., said in a research note.
Late last year, Hyundai Motor Group reached a settlement with car owners over its Theta II gasoline direct injection (GDi) engine for problems, such as engine stall and non-collision fires, in the United States.
Hyundai Motor said last week it will also voluntarily recall 77,000 Kona Electric models due to a faulty battery cell component, as 14 cases of fires in the model — 10 domestically and four overseas — have been reported since 2018.
The carmakers said the pandemic-related uncertainties will remain a major drag for them in the fourth quarter, together with the won’s strengthening against the U.S. dollar.
The dollar fell to an average of 1,188.54 won in the third quarter from 1,193.24 a year ago. A strong won drives down the value of an exporter’s dollar-denominated earnings when converted into the local currency.
To ride out such challenges, the companies plan to focus on maintaining profitability based on sales of their new models in the domestic, U.S. and European markets.
From January to September, Hyundai’s operating profit plunged 53 percent on-year to 1.14 trillion won from 2.44 trillion won and Kia’s operating income fell 44 percent to 784.85 billion won from 1.42 trillion won.