(Bloomberg) — Hyundai Motor Co. reported third-quarter profit that fell short of analysts’ estimates as tepid vehicle sales around the globe, and expanded geopolitical risks eroded earnings.
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Operating profit was 3.58 trillion won ($2.6 billion) for the three months to September, down 6.5% from a year earlier, the South Korean automaker said Thursday. That missed the 3.9 trillion won estimated by analysts. Sales rose 4.7% to 42.9 trillion won during the same period.
The decline in earnings reflected a one-off expense of about 320 billion won related to preemptive warranty extensions, the company said in its earnings statement.
South Korea’s top carmaker has pledged to ramp up production of hybrids as the global automotive sector faces persistent weakness in demand for EVs amid higher interest rates and slowing economic growth. The industry is also facing increased uncertainty in the run-up to the US presidential election, with the candidates promising diverging policies for everything from EVs to emissions rules to domestic manufacturing.
While Hyundai believes it can meet its earnings guidance for this year, heightened geopolitical risks, escalating competition and policy uncertainties around the globe are putting downward pressure on its short-term profitability, Lee Seung Jo, chief financial officer and head of the planning & finance division, said during a conference call.
“The fourth-quarter business environment doesn’t look too favorable, so we’d have to pull all our efforts to boost both retail and wholesale deliveries,” Lee told investors. “Still, we’ve pledged to keep our operating profit margin between 8%-9%, and we believe we can maintain that target going forward.”
The company’s operating margin was 8.3% in the third quarter.
While overseas auto sales dropped during the third quarter, strong sales of sport utility vehicles, hybrids and its luxury brand Genesis kept Hyundai’s average sales price higher, Yoon Hyuk Jin, an analyst at SK Securities Co., wrote in a note before the earnings announcement.
Shares dropped as much as 5.4% in Seoul trading following the announcement. The company fell more than 17% in the third quarter, the first quarterly decline in a year.
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