SEOUL, April 23 (Korea Bizwire) — South Korea’s Hyundai Motor Co. said Thursday its first-quarter net profit plunged 42 percent from a year earlier as the coronavirus outbreak disrupted production and sales, and offered a dim outlook for the second quarter amid virus fallout.
Net profit for the January-March period fell to 552.68 billion won (US$449 million) from 953.79 billion won a year earlier, the company said in a statement.
“Global vehicle demand fell over 40 percent in March due to the growing coronavirus impact, far greater than an average of 24 percent on-year decline in demand for the first quarter following supply disruptions and virus fears,” Hyundai Senior Vice President Koo Za-yong said in a conference call following the release of the earnings results.
Hyundai expected vehicle sales to fall further in the second quarter and suffer lower profitability due to the suspension of overseas plants and dealerships in major markets.
To offset declining sales overseas, the company will focus on increasing sales of new models, such as the Genesis GV80 sport-utility vehicle, the Genesis G80 sedan, and the Avante compact in the domestic market, Koo said.
As for liquidity concerns, the executive said Hyundai Motor won’t have financial difficulties until the end of this year as it holds 11 trillion won in cash reserves.
If Hyundai can make up for weak overseas sales with robust domestic sales in the second quarter, it will be able to report earnings results similar to the first quarter, analysts said.
“The company plans to flexibly respond to lower demand in global markets by reducing the production of its export volumes in domestic plants.
Instead, it will aggressively promote the new models to local customers in the second quarter as a reduction in consumption taxes is extended to June,” Kwon Soon-woo, an analyst at SK Securities Co., said.
Hyundai plans to halt operations at most of its domestic plants from April 30 to May 5.
On the overseas front, Hyundai suspended operations at plants in the United States, India and Brazil in line with local governments’ directives to prevent the spread of COVID-19.
It has seven domestic plants and 10 overseas plants — four in China and one each in the U.S., the Czech Republic, Turkey, Russia, India and Brazil. Their combined capacity reaches 5.5 million vehicles.
Operating profit rose 4.7 percent to 863.78 billion won in the first quarter from 824.87 billion won a year ago. Sales were up 5.6 percent to 25.32 trillion won from 23.99 trillion won during the same period.
In the first three months, Hyundai sold a total of 904,746 vehicles, down 11 percent from 1,021,391 units in the same period of last year.
On Thursday, Hyundai fell 0.2 percent to 92,400 won, underperforming the broader KOSPI’s 0.98 percent gain.
Its affiliate Kia Motors Corp. is set to release its first-quarter results on Friday.