Hanon Systems (018880) Q2 2024 earnings summary

Executive summary

• Revenue grew 5.4% year-over-year in 2Q 2024, driven by favorable currency effects despite lower-than-expected volume.

• Net income declined to a loss of KRW 31B due to increased net interest expense and significant FX impacts.

• For 1H 2024, revenue was KRW 4,965B (+4.1% YoY), with operating profit at KRW 136.9B, down from KRW 277.3B YoY.

• Net loss attributable to controlling interests was KRW -25.9B, compared to a profit of KRW 51.0B a year earlier.

• The company operates a single business segment focused on automotive thermal management systems, with global operations and 46 consolidated subsidiaries.

Financial highlights

• 2Q 2024 revenue: KRW 2,560B (+5.4% YoY, +6.5% QoQ); 1H 2024 revenue: KRW 4,965B (+4.1% YoY).

• 2Q 2024 EBITDA: KRW 235B (-18.8% YoY); margin 9.2%. Operating income: KRW 72B (-50.1% YoY); margin 2.8%.

• 2Q 2024 net income: -KRW 31B (down from +KRW 111B YoY), margin -1.2%.

• 1H 2024 net income: -KRW 21B (down from +KRW 156B YoY), margin -0.4%.

• Gross margin for the half-year was KRW 452.9B, with a gross margin rate of 9.1%.

Outlook and guidance

• Margins expected to improve in 2H 2024 based on cost actions and new program launches.

• Logistics costs targeted to remain under 3% of sales in 2H 2024 despite global supply chain disruptions.

• XEV revenue ratio expected to rise with new BEV launches.

• Management is focused on customer diversification, global expansion, and R&D for future mobility solutions.

• The company expects continued growth in global automotive demand, especially for eco-friendly vehicles and SUVs, but notes domestic demand remains weak due to sluggish consumer sentiment and slow EV market recovery.