Earnings outlook for Hyundai Motor Co. and Kia Corp. in the quarter ending September have been pared slightly due to production disruption from ongoing chip shortage and virus crisis.

According to projections from 17 securities firms released in the latest two months and compiled by Yonhap Infomax on Thursday, Hyundai Motor’s operating profit for the third quarter is estimated at 1.79 trillion won ($1.51 billion) on sales of 29.3 trillion won, down a tad from 1.8 trillion won in income and 29.34 trillion won in sales projected a month earlier.

A year ago, the company incurred 313.8 billion won in operating loss after it booked some trillion won worth loss reserves to cover recalls related to the quality defects of Theta 2 GDi engines.

According to compiled projections from 19 securities firms released in the latest two months, Kia Corp. was projected to earn 1.37 trillion won in operating profit in the third quarter, gaining 603.74 percent from a year earlier when its income statements also reflected the loss reserves from Theta 2 GDi engine recalls. Revenue is forecast to reach 17.72 trillion won.

But their newer earnings outlook for Kia also has been slightly revised down to 1.33 trillion won for operating profit and 16.92 trillion won for revenue on the renewed concerns about chip shortages as semiconductor factories in Southeast Asian countries have stopped operation due to the surge in coronavirus cases related to Delta variant. Global finished carmakers heavily rely on chip supplies from Southeast Asian countries, and Malaysian chip packaging and testing firm Unisem recently suspended the operation of some of its plants due to the resurge in Covid-19 cases in the country.

Chip shortage already disrupted 70,000 units and 60,000 units of Hyundai and Kia’s auto output in the first six months, and the output would fall further with the prolonged chip shortage.

Hyundai Motor had to plug off its Asan factory for five days this month due to a shortage of chips used to assemble electronic control unit (ECU) for the Theta engine. Output of about 10 percent in August and 20 percent in September from Hyundai Motor lines are projected to have been affected.

Kia also is seeing output disruption mostly from domestic lines that churn out cars that generate higher profitability.

The impact on the earnings would be minor due to bright sales outlook on their new releases due later this year.

By Pulse

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