Hyundai Commercial showed solid third quarter 2013 results despite a challenging market environment. While revenue was flat year-over-year, expenses grew moderately and profit declined slightly. The company maintained a diversified asset portfolio and strong capital and liquidity positions. Looking ahead, Hyundai Commercial expects new vehicle launches and high-yield products to drive future profit growth. It will also focus on strengthening its non-auto businesses and risk management.
2. Solid Profit Underscores Strong Fundamentals
1
Income Statement (KRW Bn)
2011
Operating
Revenue
324
Operating
Expense
238
2012
349
Analysis and Forecasting
3Q12
257
3Q13
257
YoY
Category
• Delay of new model release
0.0%
held down the demand
267
191
199
4.4%
• Profit growth slowed down
Revenue
Interest
Expense
148
SG&A
Expense
60
66
47
51
8.4%
Bad Debt
Expense
21
25
14
19
35.5%
Other-Operating
Expense
Operating
Income
Non-Operating
Revenue
Current State
164
123
119
due to low-interest policy
-3.4%
• Non-Auto profit increased
- Lease : +42.0%
- Corporate Finance : +9.4%
• SG&A expense increased
due to hiring experts in
9
86
13
12
83
-17
7
67
-12
11
58
-13
50.7%
-12.40%
8.5%
corporate financing
Expense
• Bad debt expenses
increased with asset growth
• Other operating expenses
increased due to
EBT
100
66
54
45
-17.2%
government regulation
Outlook
• New car model release
and launch of high-yield
lease product will lead
increase in profit
• Portfolio mix changes
- Non-Auto portion
increases
• Maintain sound asset
quality with preemptive
risk management
• Productivity is expected
to be improved with
strengthened expertise
• Temporary increase in
other operating expense
is terminated
3. Disciplined Asset Diversification
2
Asset Portfolio (KRW Bn)
New Car
Used Car
Machine Tool
2,882
7.4%
8.
8
%
Highlight
Corporate Finance
3.4%
9.1%
portions constantly grow
13.0%
• Maintain dominant position in auto market
5.4%
8.1%
4.2%
4.3%
7.9%
3.5%
7.4%
3.7%
2.3%
3,254
9.9%
2,333
- Corporate finance, Machine tool, Lease
3,485
11.7%
3.7%
• High-yield assets increase
PF
9.7%
- New Car MS : 80%
29.4%
27.6%
- Used Car MS : 55%
6.9%
17.3%
26.4%
16.3%
30.0%
18.7%
85.4%
57.2%
82.1%
57.6%
55.7%
80.7%
53.2%
79.3%
49.9%
55.4%
Strategic Direction
• Reinforce Non-Auto part
- Improve expertise and restructure HR system
54.2%
• Continue to develop high-yield products
2010
2011
2012
3Q13
- Auto lease , Machine tool lease, etc.
4. Excellent Asset Quality & Conservative Reserve Policy
3
Asset Quality
Highlight
• Delinquency rate decreased despite the recession
30+ Delinquency Rate
Total Reserve/Regulatory Requirement
141.7%
- Stringent Risk management policy
150.4%
• Conservative reserve policy
- Total reserve well exceeded regulatory requirement
104.6%
101.5%
Strategic Direction
1.0%
• Closely monitor risky factors as portfolio mix
1.1%
0.8%
0.6%
changed and new products launched
• Maintain conservative reserve policy
2010
2011
2012
3Q13
5. Solid Capital Base
4
Leverage Trend & Capital Adequacy Ratio
Leverage Trend
Capital Adequacy Ratio
Highlight
• Leverage trend stabilized
- Leverage level remained steady with
accumulated earnings despite asset growth
14.6%
11.7%
10.1%
10.6%
14.5x
11.6x
11.7x
Strategic Direction
9.9x
• Seek diverse leverage management policies
such as True-Sale ABS issuance
• Maintain Capital Adequacy Ratio above
regulatory level (7%)
2010
2011
2012
3Q13
6. Well Diversified Funding Portfolio
5
Funding Portfolio (KRW Bn)
Highlight
• Funding portfolio remains stable with strict
Bond
Loan
CP
ABS
3,375
2,990
12.0%
2,479
8.1%
13.0%
4.7%
internal guideline
3,571
9.2%
8.1%
5.0%
6.2%
- Bond portion increased for cost-efficiency
12.8%
12.6%
18.4%
18.1%
72.0%
74.1%
Strategic Direction
64.9%
• Maintain internal guideline
60.8%
- Long-term borrowings target > 60%
- ALM index target > 130%
2010
LongLong-Term
Borrowings
2011
2012
3Q13
61.6%
64.0%
63.3%
65.2%
* KOFC borrowings excluded
- Cash held in preparation for market
fluctuation > 250 KRW Bn