South Korea’s largest automaker Hyundai Motor Co. turned conservative with investment plans as it expects chip shortage crisis to last throughout the year after it closed the third quarter with a 14.8 percent on-quarter drop in operating profit.

Hyundai Motor in a regulatory filing on Tuesday said its consolidated operating profit reached 1.61 trillion won ($1.38 billion) in the quarter ended September, falling 14.8 percent from a quarter ago but reversing from a loss of 313.8 billion a year earlier when its income statements reflected the loss reserves from Theta 2 GDi engine recalls.

Net profit came to 1.49 trillion won after losing 25 percent on quarter. Against a year-ago period, it swung from a net loss of 188.8 billion won. Sales were off 4.8 percent from three months ago but up 4.7 percent from the previous year to total 28.87 trillion won in the quarter.

The results were more or less in line with market consensus of 1.61 trillion won in operating profit and 27.82 trillion won in revenue compiled by Seoul-based financial data provider FnGuide.

In its revised guidance for the full year of 2021, Hyundai Motor estimated sales growth of 17-18 percent on year with a profit increase of 4.5-5.5 percent. It has revised down its target for vehicle sales to 4 million units from earlier 4.16 million units due to continued output disruption from protracted chip shortages.

Investment plan also was scaled down to 8 trillion won from 8.9 trillion won – 3.3 trillion won for R&D, 3.9 trillion won for capex and 0.8 trillion won for strategic investment. Dividend payouts will stay at the similar level of last year.

“Despite multiple whammies like the raw materials price hike, unfavorable foreign exchange rates and chip shortages, the company was able to offset some of the losses with expanded sales of profitable lineups, achieving the earnings guidance level for the third quarter announced early this year,” said Seo Gang-hyun, executive vice president of finance and accounting at Hyundai Motor in a conference call.

Due to the prolonged chip shortage, the company struggled under output disruption at some of its manufacturing plants amid resurge of Covid-19 cases in Southeast Asia. It expects full normalization from next year.

Hyundai Motor shares finished 1.18 percent higher at 213,500 won in Seoul trading on Tuesday.

From July to September, Hyundai Motor sold a total of 898,906 cars worldwide, down 9.9 percent on year. Sales at home slid 22.3 percent to 154,747 units, and overseas shipments fell 6.8 percent to 744,159 units. Electric vehicle sales surged 40 percent on year to total 99,400 units.

“We’ve announced electric vehicle sales target of 560,000 units for 2025 and we know that it is a conservative target, considering the recent rapid growth of EV demand. The company will soon announce a revised sales target and strategy to further accelerate electrification,” said Koo Za-yong, senior vice president and head of investor relations at Hyundai Motor.

For the first nine months of the year, the company sold 2,930,100 cars in total.

By Lee Ha-yeon

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