Hyundai Motor profit declines 29% as strikes cut production
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Seoul: Hyundai Motor Co., whose executives are taking a pay cut because of an earnings slump, posted a drop in quarterly profit after labour strikes hurt production in South Korea.
Operating profit declined 29% to 1.07 trillion won ($943 million) in the three months ended 30 September, the Seoul-based company said on Wednesday. That compares with the 1.22 trillion won average of 23 analysts’ estimates compiled by Bloomberg. Net income fell for a 11th consecutive quarter, also missing analysts estimates.
South Korea’s biggest automaker in September suffered its first full-scale strike in 12 years after a series of partial stoppages that started in July, before the union and management reached an agreement on wages this month. The disruption led to a production loss of about 140,000 cars valued at about 3 trillion won, while a stronger Korean won eroded overseas earnings.
“Hyundai may miss its annual sales target” even after running its factories at full capacity to make up for the lost output, Koh Tae-bong, an analyst at HI Investment & Securities Co., said before the earnings announcement. The automaker will seek to recover sales by releasing new models next year, he said.
The won gained more than 7% against the US dollar in the 12 months through September, eroding Hyundai’s competitiveness and lowering the value of repatriated earnings. Demand at home also waned after a tax cut on new car sales expired in June.
Deliveries in South Korea declined 19%. Sales in the US, its second-biggest market, fell 12%, while deliveries in China, its largest market, climbed 20%.
The automaker’s executives will take a 10% cut in wages from this month, given the difficult management situation at home and abroad, Hyundai said on Tuesday.
Net income fell 9.6% to 1.06 trillion won in the quarter, missing the 1.23 trillion won average of 23 analysts’ estimates.
Hyundai declined 1.1% to 136,500 won in Seoul. The stock has declined 8.4% this year, compared with a 2.5% gain in the benchmark Kospi Index. Bloomberg