SsangYong turns profitable, reports KRW58.1-bil. net profit in 2016

15 Feb 2017 Paul Newton

SsangYong posted an annual net profit during 2016 for the first time in nine years, mainly on the back of continued strong sales of its Tivoli sport utility vehicle (SUV).

IHS Markit Perspective:

  • Significance:SsangYong posted a net profit in the final quarter of 2016 as its sales revenues gained 2.7% year on year (y/y), thanks to its popular Tivoli sport utility vehicle (SUV).
  • Implications:A combination of strong global sales of the Tivoli and gradual expansion in new overseas markets to reduce reliance on mature markets improved SsangYong's financial results during the year. The automaker's net income during the year was also helped by winning a wage lawsuit.
  • Outlook:SsangYong aims to achieve a 3.5% y/y increase in its global sales to 161,000 units in 2017, largely on the back of the rising popularity of its Tivoli nameplate and new models. IHS Markit forecasts that global sales of SsangYong's light vehicles will grow by 9.9% y/y to 166,326 units this year.

South Korean automaker SsangYong has reported its final-quarter and full-year 2016 financial results. The automaker reported a 1.6% year-on-year (y/y) increase in its fourth-quarter net profit to KRW19.4 billion (USD17 million), slightly down from a net profit of KRW19.1 billion during the same period of 2015. The automaker posted a 63.3% y/y decline in its operating profit during the final three months of 2016 to KRW8.0 billion, compared with an operating profit of KRW21.8 billion in the same period of 2015. SsangYong's sales revenues grew by 2.7% y/y during the three-month period to KRW1,000.6 billion, against KRW974.7 billion in the comparable period of 2015.

In terms of volumes, SsangYong's total global sales stood at 44,161 units in the final quarter of 2016, up 8% from 40,890 in the comparable period of 2015. Although its sales in export markets surged 38.8% y/y during the quarter to 30,421 units, its domestic sales declined by 2.6% y/y to 29,625 units, mainly on the phasing out of temporary special consumption tax (SCT) benefits at the end of June and a high base of comparison.

During full-year 2016, SsangYong Motor swung to a net profit of KRW58.1 billion versus a loss of KRW61.9 billion in 2015. The automaker also posted an operating profit of KRW28 billion in 2016, compared with an operating loss of KRW35.8 billion in 2015, as sales revenues went up by 7.0% y/y from KRW3,390.1 billion in 2015 to KRW3,628.5 billion during 2016.

SsangYong sold a total of 155,844 units globally during 2016, up 7.7% y/y. This was split between a 3.9% y/y increase in domestic sales to 103,554 units and a 15.9% y/y jump in export sales to 52,290 units. The Tivoli sport utility vehicle (SUV) aided overall volumes for the automaker globally; it remained the company's top-selling nameplate with total sales of 85,821 units in 2016, up 35.0% y/y. This is split between domestic sales of 56,935 units and export sales of 28,886.

Outlook and implications

SsangYong continued to record a net profit for the fifth consecutive quarter, mainly on the back of strong sales of its Tivoli nameplate. However, the decline in operating profit can be attributed to the increase in cost of sales and selling, general, and administrative (SG&A) expenses. During the fourth quarter, the cost of sales went up by 1 percentage point to 84%, while SG&A expenses rose by 0.5 percentage point to 15.2%.

Meanwhile, SsangYong's financial performance during the full-year 2016 marked a welcome change as the company posted its first annual net profit in nine years. A combination of strong global sales of the Tivoli and gradual expansion in new overseas markets to reduce reliance on mature markets improved SsangYong's financial results during the year. In a bid to further increase its sales, the automaker recently began sales of its Tivoli nameplate in Russia.

SsangYong's net earnings during the year were also assisted by the South Korean Supreme Court's decision to excuse SsangYong from paying wages to workers forced to take unpaid leave. After winning the lawsuit, the automaker revised its net profit after tax during the third quarter of 2016 upwards to KRW18.3 billion from KRW2.7 billion. Furthermore, SsangYong's cost of sales during the year went down by 0.9 percentage point to 83.7% and SG&A expenses also dropped 0.9 percentage point to 15.5%.

For 2017, SsangYong aims to achieve a 3.5% y/y increase in its global sales to 161,000 units. The automaker expects that this growth will come on the back of the rising popularity of its Tivoli nameplate. SsangYong did not provide a breakdown of its expected 2017 sales by market. The automaker will continue to focus on the Tivoli nameplate and plans to launch a new premium SUV, currently codenamed the Y400. SsangYong plans to release a new model every year until 2019. Mahindra and Mahindra (M&M), the Indian parent company of SsangYong, is considering an investment of around KRW1 trillion to increase SsangYong's annual global sales to 300,000 units by 2021 (see World: 23 March 2016: M&M to invest KRW1 tril. to double SsangYong's global sales by 2021). The automaker also said that it plans to reduce its costs this year.

SsangYong also plans to set up a production base in China. During October 2016, the automaker signed a letter of intent (LoI) with Chinese automaker Shaanxi Automobile Group to establish a joint venture (JV) in China.

Furthermore, SsangYong is planning to launch electrified versions of its existing models by 2020, starting with the Tivoli. According to an Autocar report, battery-powered Tivolis are currently undergoing testing. The automaker is also planning to launch three new cars by the end of this decade, each expected to have an electric powertrain option. Earlier in 2016, SsangYong showcased the SIV-2 (Smart Interface Vehicle) hybrid concept at the 2016 Geneva Motor Show (see Switzerland: 2 March 2016: Geneva Motor Show 2016: SsangYong shows new Tivoli XLV). This mid-size premium SUV concept features a 1.5-litre direct-injection turbo gasoline (petrol) engine with a 10 kWh electric motor, creating a 48 V mild-hybrid system. The company at the time claimed that the modular chassis on which the car was built could be developed to feature full hybrid, plug-in, and full electric powertrains. SsangYong is expected to benefit from the experience of its parent M&M in the electric-vehicle (EV) segment. In its home country, India, M&M has the strongest portfolio of EVs. Since M&M acquired the manufacturer of India's first indigenous electric car, the Reva, and updated it to the e2o, it has launched two more EV models: the e-Verito and e-Supro.

According to IHS Automotive forecasts, global sales of SsangYong's light vehicles, including passenger vehicles (PVs) and light commercial vehicles (LCVs), will grow by 9.9% y/y to 166,326 units in 2017, up from an estimated 151,679 in 2016. The total is expected to cross 200,000 units by 2020.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.


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