Hyundai Motor Co

Ladies and gentlemen, thank you for attending this conference call. We will now begin Hyundai Motor Company's business results conference call for the fourth quarter of 2024. Once again, the presentation materials can be downloaded from the Financial Supervisory Services Electronic Disclosure System at dartsfss.or.kr or from our IR website, www.hyundai.com. Joining us at this conference call are Executive Vice President Seung Jo Lee, Head of Planning and Finance Division, Executive Vice President Da Hyun Goo, the Head of IR Division, Vice President Dong Hwan Kim of Finance and Accounting Subdivision, Michael Yoon, the Head of IR Group, and Senior Vice President Hyung Seok Lee, the Head of Planning and Finance Division of Hyundai Capital. We will first have Hyundai Motor Company's presentation on the business result, followed by a Q&A session with the attending investors. Those who have questions are advised to press the star button followed by number one after the presentation. Now we will proceed with the presentation by Michael Yoon, the Head of IR Group at Hyundai Motor Company. Hello, this is Michael Yoon, Head of IR Group. Welcome everyone to Hyundai Motor Company's 2024 Q4 Business Results Conference Call. On behalf of Hyundai Motor Company, I appreciate your time for participating in today's call. please refer to the presentation HMC 2024 Q4 business results on our IR website. Today's presentation consists of two parts, sales summary and financial summary. For more information, please refer to the appendix page. First part is sales summary. Our 2024 Q4 global wholesale decreased by 2.2% year-on-year to 1,066,239 units while retail sales decreased by 0.8% year-over-year to 1,075,434 units. In the fourth quarter, our global wholesale decreased slightly compared to the previous year. However, excluding China, our Q4 wholesale increased by 2% year-over-year. In the domestic market, sales decreased by 4.6% year-over-year due to softened demand for macrofactors and seasonal cyclicality. North America saw a 4.4% increase in sales, driven by continued strong sales of high-margin vehicles. The U.S. market witnessed increase to sales of hybrids and Genesis with growth rates recording 60.6% and 9.1% year-on-year, respectively, compared to the previous year, boosted by increase in demand of overall hybrid models, including Tucson, Santa Fe, Avanti, and Sonata. In Europe, although hybrid sales increased by 31.3% compared to last year driven by strong sales of Santa Fe, Kona, and Tucson facelift hybrids, wholesale sales decreased by 3.8% compared to the previous year due to weaker demand for EVs. India wholesale witnessed a 0.7% decrease year on year, but the retail sales increased 2.5% due to a shift towards the retail-oriented sales strategy. The annual wholesale decreased 1.8% year on year to 4,141,959 units, while retail sales decreased by 2.7% to 4,044,513 units. Next is sales by model and key status. Global SUV sales, including Genesis, accounted for 59.8%, a 1.0 percentage point increase compared to the previous year, influenced by the global expansion of Santa Fe and the sales ramp-up of Creta facelift in emerging markets. Proportion of Genesis recorded 5.5%, which increased by 0.5%, driven by strong sales of GV70. Eco-friendly vehicle sales increased by 21% due to strong sales of HEVs. EV sales were similar to that of the previous year, with some recovery in demand due to the strengthening of the EV lineup, including the launch of Casper EV. Due to EV chasm, HEV sales surged by 41.3% compared to the previous year replacing EV demand. The HEV proportion continues to expand as hybrid sales increase significantly in strategic markets such as North America. Next is annual sales summary. The SUV proportion, including Genesis, recorded 59.7%, which is a 2.6% increase from the previous year end. Genesis proportion increased 0.3% to 5.6%. Despite softening of global EV demand, the sales of eco-friendly vehicles increased by 8.9% to 757,000 units thanks to the surge of hybrid sales. This is the end of the presentation on sales summary, and now I'll move on to financial summary. This is a summary of our income statement. Consolidated revenue increased by 11.9% year-over-year to 46.6 trillion Korean won, and operating income decreased by 7.8%. 17.2% year-over-year to 2.8 trillion KRW. The automotive division's revenue increased by 6.8% year-over-year due to an increase in regional and product mix improvement from high margin vehicles. The operating profit decreased by 33.7% year-over-year. Revenue from finance division increased by 44.6% year-over-year due to strong sales of vehicles in the US in growth and penetration rate.

And operating profit increased by 79.1%.

Net income increased by 12.3% year-over-year to 2.5 trillion Korean won. Next is a summary of our annual income statement. Annual consolidated revenue increased by 7.7% year-over-year to 175.2 trillion Korean won, and operating income decreased by 5.9% year-over-year to 14.2 trillion Korean won with OP margin of 8.1%. Net income increased by 7.8% year-over-year to 13.2 trillion Korean won. Next is quarterly revenue and operating income analysis. For revenue, volume effect from global sales increasing, excluding China, had an impact of 164 billion Korean won. Despite incentive increase, strong sales in North America and the increase in ASP had a positive impact on mixed effect of 1,702 billion won. In addition, favorable exchange rate conditions resulted in FX effect to results in 454 billion Korean won. Lastly, with revenue increase from finance business, the total revenue increased by 11.9% year over year. Regarding operating profit, depreciation of Korean won at quarter end impacted the warranty provisions to be revaluated at a higher FX rate, resulting in a negative FX effect of 320 billion Korean won. Rising incentives led level led to the net mixed effect to result in negative 425 billion Korean won. Due to increase in SGMA expenses, including the labor and R&D costs, the operating profit decreased by 17.2% year-over-year. Next is the annual revenue and operating income analysis. Global sales excluding China expanded compared to the previous year, leading to volume effect of 396 billion Korean won. Despite increase in the incentive spending, the mixed improvement outweighed the increase incentives and resulted in mixed improvement effect of 5,188 billion Korean won. The annual average $1 exchange rate rose compared to the previous year, contributing to the increase in revenue. Total revenue increased by 7.7% year-over-year. Operating profit was affected by volume effect of 86 billion Korean won and the net mixed effect of 157 billion Korean won. Total operating profit decreased by 5.9% year-over-year due to an increase in SG&E expenses such as labor and warranty related expenses. Our fourth quarter cost of goods sold ratio recorded a 0.5 percentage point increase year on year to 8.5%. SG&A increased by 26.7% to 6.3 trillion won due to an increase in labor costs. Lastly, net profit increased by 12.3% year on year to 2.5 trillion won. Our annual COGS Ratio recorded a 0.2% percentage point increase year-on-year to 79.6%. SG&E increased by 17.2% due to an increase in labor and work expenses and recorded 21.5 trillion won. Lastly, net profit increased by 7.8% year-on-year to 13.2 trillion won.