Hyundai Motor saw sales and operating profit rise by a small margin in the first quarter of the year, beating expectations.

But the automaker saw real operating profit, except transient revenues, decline 8 percent over the same period a year ago. Hyundai Motor has entered a “contingency plan mode” by securing 11 trillion won in liquidity.

The automaker is not forecasting an easy V-shaped rebound. Hyundai Motor said on April 23 that it logged 25.319.4 trillion won in sales, 863.8 billion won in operating profit and 552.7 billion won in net profit in Q1.

The automaker saw sales and operating profit rise 5.6 percent and 4.7 percent, respectively, compared to one year ago.

The consensus expectations among securities companies was a decline of about 3 percent in sales, and more than 10 percent in operation profit. The automaker’s Q1 results went surpassed that expectations.

However, the unexpected business outcome falls short of an “earnings surprise,” since the Q1 operating profit included 105.6 billion won in transient profit related to a joint self-driving joint venture between Hyundai Motor and Aptiv.

Hyundai Motor made an investment in kind worth 105.6 trillion won for the use of the intellectual rights of the joint-venture operation. If the transient profit is excluded, Hyundai Motor saw operating profit drop 8.1 percent to 758.2 billion won.

Furthermore, the automaker benefited from a weak won effect worth 219 billion won, Hyundai Motor said.

Hyundai Motor sold 903,3371 units in Q1, an 11.6 percent decline over a year ago, due to the economic shock caused by the spread of COVID-19. The automaker’s quarterly sales dropped to below 1 million units for the first time since Q3 2011.

As for rising sales despite a drop in the number of cars sold, Lee Cheol-gon, head of Hyundai Motor’s IR Team, said SUVs and value-added cars saw sales rise in Q1.

The problem is the side effects of the pandemic would occur in the second quarter. Until February, the COVID-19 pandemic spread to only Asian countries, including China and Korea, so Hyundai Motor had operations in Korea and China disrupted and saw sales decline.

Starting in March, the pandemic spread to North America, Europe and Central and South America, causing the Korean automaker to suffer setbacks in global production and sales in areas except Korea and China.

Market analysts predicted that Hyundai Motor would see more than a 10 percent decline in sales and operating profit 44 percent lower in Q2.

In early May, Hyundai Motor, Kia Motors as well as other global automakers are expected to resume operations.
Kia Motor management and trade union decided to close the first and second plants at Sohari between April 27 and May 8, as well as suspend operation there again between May 22 and May 25.

If annual holidays are counted, the Sohari plants will have been closed for almost half of May. The automake’s second plant, in Gwangju, will suspend operation between April 27 and April 29 as well as May 6 through May 8.

Hyundai Motor is expected to suspend operation on holidays in May.

A survey of 300 major global car brands conducted by the Korea Automobile Manufacturers Association, showed that 213 operations, or 71 percent, shut down as of April 16.

The Japanese financial newspaper Nikkei reported that Toyota Motor came up with a revision plan in which 18 plants in Japan would halve production compared to its earlier target and reduce shipments for June 40 percent to cope with the shock, caused by the spread of COVID-19.

Hyundai Motor predicts that a V-shaped rebound is unlikely since uncertainties, caused by the COVID-19 pandemic, and crude oil price plunge, would have a greater impact on the global economy.

Hyundai Motor Group attaches a groupwide priority to securing liquidity through retrenchment. Kim Sang-hyun, head of Hyundai Motor’s Financing Division, Hyundai Motor secured 11 trillion won in liquidity as of the end of Q1.

The automaker, setting stable liquidity management as a top management priority, has built a groupwide regime to cope with a crisis and emergence plans to purse retrenchment and boost value-added car sales.

In a filing, Hyundai Motor said the automaker plans to issue corporate debentures worth 300 billion to pay foreign currency borrowings, to be redeemed in the fourth quarter of the year.