Automotive supplier Hanon Systems delivers Q3 earnings shock

South Korea's Hanon Systems Corp., a world-leading heat pump systems maker for automobiles, on Thursday reported worse-than-expected results in the third quarter due to a surge in freight costs and large one-off expenses.

Its operating profit plummeted 67.2% to 20.3 billion won ($15 million) in the quarter ended in September, compared to the same period last year. The earnings came in at about one-third the market consensus of 62.4 billion won.

Sales edged up 6% to 2.3 trillion won during the period.

Hanon booked 32 billion won as expenses in the quarter, including 15 billion won for sales and management costs and 7 billion won in labor costs caused by the United Auto Workers (UAW) strike from mid-September through October 30.

The auto parts maker is 50.5% owned by Hahn & Company, a South Korean private equity firm.

SHIFT TOWARD PROFITABILITY FROM GROWTH

Next year it will shift its focus toward improving profits through operational efficiency from customer diversification and sales growth in 2023, “with a clear priority on financial targets and shareholder value,” it said in prepared presentation materials to deliver the third-quarter results.

Hanon forecasts its operating profit to climb to 410 billion won for the entire year of 2024 from this year’s estimated 280 billion won.

Revenue growth is expected to be slower than that of profits.

Its sales in 2024 are forecast to rise to 9.8 trillion won, versus the estimated 9.5 trillion won in 2023, according to the company.

Hanon supplies battery thermal management systems, heat pump systems and cooling fan motors for combustion engine cars and electric vehicles. It competes with Japan's Denso, Germany’s Mahle and Valeo.

It derives about half of its revenue from South Korea's leading automotive group Hyundai Motor Group, which includes Kia Corp. It also supplies automotive devices to Ford, General Motors, BMW, Stellantis and Mercedes-Benz.

Write to SungSu Bae at baebae@hankyung.com
 

Yeonhee Kim edited this article.