Hyundai Earnings Fall Short on Weak China Sales, Legal Costs
(Bloomberg) -- Hyundai Motor Co. reported third-quarter earnings that missed analysts’ estimates on a continuing slump in demand in China and costs to settle lawsuits over suspected faulty engines.
- Operating profit was 379 billion won ($324 million), compared with the average analyst estimate of 444 billion won. Net income was in line with predictions and sales topped estimates.
- Hyundai is under pressure to revive its Chinese operations, potentially through restructuring, to respond to waning demand in the world’s largest car market.
- Meanwhile chairman-in-waiting Euisun Chung is steadily shifting Hyundai’s focus to new products such as electric vehicles, raising concerns among investors that earnings growth might suffer as development costs increase. The company said it will have 16 EV models by 2025, up from four currently. EVs are still far from attracting mass-market buyers due to concern about high prices and limited driving ranges.
- A settlement of class-action suits in the U.S. and South Korea resulted in a one-time charge of about 600 billion won in the third quarter. The automaker said this month it will provide lifetime warranties and other compensation to resolve issues with owners of its Theta II engines, which have been probed over fire risk. Affiliate Kia Motors Corp. had an expense of about 310 billion related to the same issue, yet the company posted third-quarter earnings topping estimates.
- Hyundai’s full SUV lineup is finally hitting markets worldwide after years of requests from shareholders for the company to lessen its reliance on sedans. The large Palisade SUV has met strong demand in South Korea and went on sale in the U.S. in June, taking on Ford Motor Co.’s Explorer and Toyota Motor Corp.’s Highlander.
- Shares of Hyundai rose 0.8% in Seoul, while Kia gained 2.1%.
- Hyundai Motor Third Quarter Operating Profit Misses Estimates
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