SEOUL (Reuters) - South Korea’s Hyundai Motor Co said on Monday it swung to a net loss for July-September, missing market estimates by a wide margin, as costs related to engine quality issues and recalls smashed what would otherwise have been strong earnings.
Hyundai, the world’s fifth-biggest automaker when combined with affiliate Kia Motors Corp, reported a net loss of 336 billion won ($297.72 million). The average of 12 analyst estimates complied by Refinitiv was 1.2 trillion won in profit.
The automaker said it booked 2.1 trillion won to cover charges related to engine defects that increased the risk of stalling and fire. The years-long quality problems have cost Hyundai and Kia nearly $5 billion and left the pair subject to a probe by U.S. authorities over the manner of their recalls.
“Third-quarter results reflect engine-related provision expenses as the company took preemptive measures to ensure customer safety and cover any possible future increase in quality-related expenses,” Hyundai said in a statement.
“We sincerely apologise to our shareholders and investors for having repeated quality cost issues over three quarters since 2018,” an executive told an earnings briefing.
Operating loss for the third quarter was 314 billion won. Excluding quality costs, the figure would have been 1.8 trillion won profit. Revenue rose 2.3% on year to 27.6 trillion won.
Analysts said the operating loss was not as deep as expected as Hyundai enjoyed firm sales in the quarter backed by increased demand in the United States and emerging markets such as India.
Its stock rose as much as 4.2% after the announcement versus a 0.3% fall in the benchmark KOSPI in afternoon trade.
($1 = 1,133.4500 won)
Reporting by Heekyong Yang and Joyce Lee; Additional reporting by Joori Roh; Editing by Christopher Cushing and Kim Coghill
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