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Operating profit for both companies expected to decrease by 23.3% and 22.6% respectively compared to the same period last year
As Hyundai Motor and Kia announce their Q1 results this week, both companies are expected to report sluggish performance due to increases in tariffs and sales warranty provisions.
According to the automotive industry on the 22nd, Hyundai Motor and Kia will hold conference calls on the 23rd and 24th respectively to announce their Q1 results.
According to Yonhap News' analysis of securities industry reports from the past three months, using the Yonhap Infomax system, Hyundai Motor's Q1 revenue and operating profit this year are projected to be 45.8923 trillion won and 2.7866 trillion won, respectively.
This represents a 3.3% increase in revenue and a 23.3% decrease in operating profit compared to the same period last year, which saw revenue of 44.4078 trillion won and operating profit of 3.6336 trillion won.
Kia, a fellow group company, also does not have a bright outlook for Q1 this year.
Kia's Q1 revenue and operating profit forecasts for this year were tallied at 29.0062 trillion won and 2.3294 trillion won, respectively.
This represents a 5.7% increase in revenue and a 22.6% decrease in operating profit compared to Q1 last year (revenue 28.0175 trillion won, operating profit 3.0086 trillion won).
Although the two companies recorded better sales performance in the past Q1 compared to other finished car manufacturers, it is interpreted that US tariffs and increased sales warranty provisions have offset the sales effect.
In Q1 this year, Hyundai Motor provisionally sold 975,123 units in the global market, a 2.6% decrease compared to the same period last year, while Kia sold 779,169 units, a 0.8% increase.
However, Hyundai Motor and Kia exported cars to the US without tariffs until Q1 last year, and the resulting base effect was reflected in this year's Q1 performance.
US tariffs, imposed from April last year, were lowered from 25% to 15% starting in November of the same year, but Hyundai Motor and Kia's Q1 tariff costs for this year are estimated to be around 2 trillion won.
Furthermore, it is analyzed that the rise in the won/dollar exchange rate led to an increase in sales warranty provisions, negatively impacting operating profit. Sales warranty provisions, which cover costs for free repairs and other services, are set in foreign currency and reflected in accounting.
Additionally, supply disruptions due to a fire at engine valve parts manufacturer Anjeon Industry, sluggish sales in the Middle East due to the Iran war, and increased transportation costs are also interpreted to have negatively affected performance.
Lee Jae-il, a researcher at Eugene Investment & Securities, stated, "Q1 last year saw a significant pre-demand effect before the tariffs took effect, and the resulting base effect will be reflected in Q1 performance this year." He added, "There is also the impact of sales warranty provisions due to the rise in year-end exchange rates and the Palisade recall, among other factors."
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