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Hyundai Motor’s fourth-quarter net profit rises 31%, misses forecasts

New Hyundai cars are displayed on the sales lot at San Leandro Hyundai on May 30, 2023 in San Leandro, California.

Justin Sullivan | Getty Images

South Korea’s Hyundai Motor Co on Thursday reported a 31% rise in fourth-quarter profit that missed analyst expectations due to unfavorable exchange rates as well as one-off costs related to the sale of its Russia plant in December.

Hyundai Motor, the world’s No.3 automaker by sales with its affiliate Kia Corp, reported a net profit of 2.2 trillion won ($1.65 billion) for the October-December period versus a profit of 1.7 trillion won a year earlier.

That compared with a 2.9 trillion won average forecast by LSEG SmartEstimate, which is weighted towards estimates from analysts who are more consistently accurate.

In December, Hyundai Motor said it would take a 287 billion won ($219.2 million) loss on selling its plant in Russia, where operations have been suspended since March 2022.

Hyundai is targeting revenue growth of 4.0%-5.0% this year. It expects a 4.9% jump in North American vehicle sales but a 3.7% drop and 0.6% fall in vehicle sales in China and Europe, respectively.

It predicted an operating profit margin between 8.0% and 9.0% in line with last year.

“Hyundai Motor expects the business environment will remain difficult to predict, due to macro uncertainties centered on emerging markets and a downturn in the real economy,” Hyundai Motor said in a statement.

Analysts noted that like other automakers, Hyundai is grappling with slowing growth due to a difficult economic environment, including high interest rates and inflation that have pushed vehicles out of the reach of some buyers.

“It appears that pent-up demand for vehicles from limited supplies has been disappearing as high interest rates eat away car buyers’ willingness to purchase,” said Lee Jae-il, an analyst at Eugene Investment & Securities.

Lee added that Hyundai Motor would likely manage its vehicle inventory level more tightly than previous years as pent-up demand has disappearing and excessive inventories would hurt its profitability.

Shares in Hyundai Motor were trading up 2.0% after it reported its earnings, outperforming 0.1 rise for the benchmark Kospi.

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