Hyundai Motor third quarter profit falls short of estimates as chip shortage takes its toll

A Hyundai sign is seen outside a car showroom in Bletchley, Milton Keynes, Great Britain on May 31, 2020. REUTERS / Andrew Boyers

SEOUL, Oct. 26 (Reuters) – South Korea’s Hyundai Motor Co (005380.KS) slightly missed analysts’ earnings estimates as the global chip crisis drove vehicle shipments down and said it expects it to take a long time to revert to a normal chip. Provisions.

Hyundai, which along with its subsidiary Kia Corp (000270.KS) is among the world’s top 10 automakers by sales, reported net profit of 1.3 trillion won ($ 1.10 billion) for the quarter July-September.

In the same period a year earlier, it recorded a loss of 336 billion won when it was hit by a one-time expense related to engine quality issues and recalls.

Profit was just short of an average analyst forecast of 1.4 trillion won compiled by Refinitiv SmartEstimate.

“Hyundai Motor expects year-over-year sales growth to slow for the remainder of 2021 amid an unfavorable business environment caused by volatile semiconductor chip supply,” Hyundai Motor said in a statement. communicated.

The automaker has said the global chip shortage will last until the end of this year or next, and it expects it will take a long time to get back to normal.

“The chip shortage will likely continue in the fourth quarter, but supply conditions would partially improve in the fourth quarter compared to the third,” Hyundai Motor executive vice president Seo Gang Hyun said on a call. with analysts.

The global chip crisis, triggered in part by increased demand for laptops and consumer electronics during the pandemic, has shut down automotive production lines around the world and has forced automakers to cut forecasts for ‘shipping.

Hyundai previously said year-over-year sales growth could slow in the second half of 2021 due to difficult business conditions, including the volatile supply of automotive chips.

The company said it had cut this year’s capital spending by more than 10% to 8 trillion won to better respond to uncertainties, including the coronavirus pandemic.

It revised this year’s auto segment operating margin profit to 4.5% to 5.5%, from 4% to 5% previously announced, citing strong sales of its sport utility vehicles ( High-margin SUV) and its top-of-the-line Genesis cars.

“Based on Hyundai’s review of its operating margin targets, the coming fourth quarter results would likely mark the most profitable quarter of this year, as the company appears to expect a likely improvement in operating issues. ‘chip supply,’ said Lee Jae-il, analyst at Eugene. Investment security.

Hyundai had made its best quarterly profit in about six years in the April-June quarter thanks to its careful management of the supply chain that helped it manage the chip shortage better than other automakers.

But the prolonged crisis forced Hyundai to suspend production in the third quarter.

This month, Hyundai’s global COO Jose Munoz said the automaker is keen to develop its own chips to reduce reliance on others.

Hyundai Motor shares were trading up 0.7% after the company reported its results, compared to a gain of 0.8% in the larger KOSPI market (.KS11).

($ 1 = 1,177,2300 won)

Reporting by Heekyong Yang and Joyce Lee; Editing by Christopher Cushing, Robert Birsel

Our Standards: Thomson Reuters Trust Principles.

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