Hyundai Motor's Q3 profit misses estimates as chip shortage takes a toll
(Adds comment from Hyundai, analyst)
By Heekyong Yang and Joyce Lee
SEOUL, Oct 26 (Reuters) - South Korea's Hyundai Motor Co
slightly missed analysts' profit estimates as the
global chip crisis drove down vehicle shipments and it said it
expects it will take a long time to get back to normal chip
Hyundai, which together with affiliate Kia Corp
is among the world's top 10 automakers by sales, reported a net
profit of 1.3 trillion won ($1.10 billion) for the
In the same period a year earlier it posted a loss of 336
billion won when it was hit by a one-time expense related to
engine quality issues and recalls.
The profit was just shy of an average analyst forecast of
1.4 trillion won compiled by Refinitiv SmartEstimate.
"Hyundai Motor expects that on-year sales growth might slow
down for the rest of 2021 amid adverse business conditions
caused by the unstable supply of semiconductor chips," Hyundai
Motor said in a statement.
The automaker said the global chip shortage would last until
the end of this year or into next year, and it expected it would
take a long time to get back to normal.
"The chip shortage will likely continue into the fourth
quarter but supply conditions would partially improve in the
fourth quarter compared with the third," Hyundai Motor's
Executive Vice President Seo Gang Hyun said in a call with
The global chip crisis https://www.reuters.com/article/chips-shortage-explainer-int-idUSKBN2BN30J,
triggered partly by surging demand for laptops and consumer
electronics during the pandemic, has shuttered auto production
lines globally and forced automakers to slash shipment
Hyundai previously said its on-year sales growth might slow
in the second half of 2021 due to challenging business
conditions, including the unstable supply of automotive chips.
The company said it had cut this year's capital expenditure
spending by more than 10% to 8 trillion won to better respond to
uncertainties, including the coronavirus pandemic.
It revised up this year's auto-business operating margin
profit to 4.5%-5.5% from a previously announced a 4%-5%, citing
strong sales of its high-margin sport-utility vehicles (SUVs)
and its premium Genesis cars.
"Based on Hyundai's revision of its operating margin
targets, the upcoming fourth quarter results would likely mark
the most profitable quarter this year as the company seems to
expect that the chip supply issues would likely improve," said
Lee Jae-il, analyst at Eugene Investment & Securities.
Hyundai had turned in its best quarterly profit in about six
years in the April-June quarter thanks to its conservative
supply chain management that helped it to navigate 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 chief operating officer Jose
Munoz said the automaker wanted to develop its own chips https://www.reuters.com/technology/hyundai-motor-says-it-wants-develop-chips-cut-reliance-chipmakers-2021-10-13
to reduce reliance on others.
Shares of Hyundai Motor were trading up 0.7% after the firm
published its earnings results, compared with a 0.8% rise in the
broader market KOSPI.
($1 = 1,177.2300 won)
(Reporting by Heekyong Yang and Joyce Lee; Editing by
Christopher Cushing, Robert Birsel)
First Published: 2021-10-26 07:04:09
Updated 2021-10-26 08:29:52
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