[Edaily Reporter LEE YUNHWA ] HL Mando(204320)reported a sharp decline in operating profit and a net loss in the third quarter of this year amid stagnant sales. While production disruptions for domestic finished vehicles and a slump in the Chinese market limited revenue growth, rising costs due to higher semiconductor and raw material prices, along with increased research and development (R&D) expenses for future businesses, put pressure on profitability. Compounded by worsening foreign exchange gains and losses due to the strengthening won, the company’s bottom line also turned to a loss.

HL Mando announced on the 30th that it posted consolidated revenue of 2.3205 trillion won and operating profit of 51.5 billion won for the third quarter of this year. While revenue remained at a level similar to the 2.3213 trillion won recorded in the same period last year, operating profit fell 45.3% from 94.1 billion won. Compared to the previous quarter, revenue decreased by 7.0% and operating profit by 51.8%.

Net income turned to a loss. While the company posted a net profit of 49.2 billion won in the third quarter of last year, it recorded a net loss of 42.5 billion won this year. Profit from continuing operations before income tax also shifted from a surplus of 65.5 billion won last year to a deficit of 41.2 billion won this year.

The deterioration in profitability was driven by a combination of rising cost pressures and foreign exchange losses. Cost of sales in the third quarter totaled 1.9754 trillion won, an increase of 16.5 billion won from the same period last year. Meanwhile, as revenue remained virtually flat, gross profit decreased from 362.4 billion won to 345.1 billion won. The gross profit margin also fell from approximately 15.6% to 14.9%. The company cited rising semiconductor and raw material prices as the main factors behind the cost pressures.

Investments in the development of future core products also continued. The burden of research and development expenses grew as the company expanded the development of next-generation vehicle electronic control products, such as high-performance computing (HPC), led by HL Clemove, its affiliate specializing in autonomous driving. In addition, foreign exchange gains and losses for the third quarter recorded a loss of 61.4 billion won, marking a shift to a deficit from the 16.4 billion won profit recorded in the same period last year. The deterioration in foreign exchange gains and losses alone amounted to approximately 77.8 billion won, which, combined with the decline in operating profit, weighed on pre-tax profit and net income.

By region, growth in the Indian market was particularly notable. Third-quarter revenue in India reached 282.5 billion won, a 30.8% increase compared to the same period last year. This was driven by the expansion of its customer base among local Indian automakers and an increase in supply volumes. India’s share of total revenue also rose from 9% to 12%.

In contrast, domestic revenue fell 8.6% to 716.5 billion won. This was influenced by reduced domestic production and production disruptions at HyundaiMotor and KIA CORPORATION. Revenue in China also declined by 1.7% to 494.7 billion won due to a slowdown in sales by local automakers. Revenue in the Americas rose 0.4% to 634.4 billion won, while revenue in Europe increased 3.1% to 192.5 billion won.

Despite weak profitability, the company continued to secure new orders and expand its future growth businesses. HL Mando’s new orders for the third quarter totaled 1.9 trillion won, bringing the cumulative total for the first three quarters to 7.6 trillion won. This represents approximately 59% of the annual target of 13 trillion won. The company expects a concentration of new orders for major programs in the fourth quarter and is working toward achieving its annual target.

Automotive electronics accounted for 76% of cumulative new orders. In the third quarter, the company secured orders for calipers, rack-driven electric power steering (R-EPS), and advanced driver-assistance system (ADAS) products—including front cameras and radar—for HyundaiMotor’s new vehicle programs in North America. It also expanded the supply of steering, braking, and suspension systems, as well as electronic control products, to local automakers in China and India. The order backlog at the end of the third quarter stood at 58 trillion won.

In particular, the company is fostering electronically controlled suspension (SDC) as a future growth engine. SDC is a technology that enhances ride comfort and driving stability by adjusting damper damping force in real time according to driving conditions. HL Mando forecasts that SDC sales will increase from 111 billion won last year to 342 billion won by 2030. The company’s strategy is to shift its business structure toward automotive electronics in response to the proliferation of electric vehicles and software-defined vehicles (SDVs), thereby strengthening its foundation for mid- to long-term growth.