Good afternoon. I'd like to thank all the attendants today. Welcome to Q4 2023 HMC Earnings Call. You can download the presentation material at dart.fss.org.kr or www.hyundai.com on the IR status menu. For today's conference call, we have [indiscernible], SVP of Planning and Finance Division; [indiscernible], SVP of IR Group; SVP of Hyundai Capital, [indiscernible]; and Head of IR Team, Taesik Yun. For today's conference call, HMC will announce its results followed by a Q&A session. [Operator Instructions] I will now turn it over to Michael Yun, Head of Investor Relations team.

Good afternoon. I am Michael Yun, Head of IR team. Welcome, everyone, to HMC's 2023 Q4 Earnings Call. On behalf of Hyundai Motor Company, I appreciate your time for participating, and please refer to the presentation HMC 2023 Q4 Business Results on our IR website. For today's presentation, we have sales and financial summary. And for specific sales by region and statement of cash flows, please refer to the Appendix page. First is our sales summary. Our 2023 Q4 global wholesale increased by 4.9% year-over-year to 1,089,862 units, while retail sales increased by 6% year-over-year to 1,084,555 units. In Q4, our wholesales increased due to strong sales in advanced markets such as North America and Europe. In our Korea market, sales increased by 3.4% year-over-year due to SUV sales expansion with the launch of the new Santa Fe in August last year and strong sales of eco-friendly vehicles, thanks to the new hybrid models introduction. In North America, wholesale increased by 9.8% year-over-year with a strong sales led by high-value models. And in the U.S. market, wholesales increased by 7.9% year-over-year recording highest sales ever, owing to product enhancement of Genesis and SUV models. Despite the uncertainties in the U.S. market, EV sales also increased, including IONIQ 5 by including -- by actively taking sales strategy for lease and fleet. In Europe, wholesales exceeded the annual business plan and increased by 19% year-over-year due to new launch of KONA hybrid. In India, wholesales increased by 9.4% year-over-year and had a stable sales in SUV segment with the launch of micro SUV, Exter in July. Our 2023 global wholesales increased by 6.9% year-over-year to 4,216,898 units, while retail sales increased by 4.9% year-over-year to 4.1 million units. Next is sales by model and key status. Global SUV sales portion increased by 4 percentage point year-over-year to 55.2% due to global launch of new Santa Fe and Santa Fe Hybrid. Sales of eco-friendly vehicles increased by 27.7% year-over-year due to the expanded lineup of hybrid vehicles. Especially in Korea, hybrid portion increased by 3.3 percentage points year-over-year to 9.5% due to strong sales of Grandeur, KONA and Santa Fe Hybrid. Next is annual sales by model. Our SUV portion increased by 2.4 percentage point year-over-year to 53.9% while the penetration of Genesis brand maintaining 5.3%. Despite the slowdown in global EV market, annual sales of eco-friendly vehicles recorded 700,000 and increased by 37.1% year-over-year. That is the end of presentation and sales summary and now I'll move on to financial summary. This is income statement summary. As disclosed today, fiscal year 2022 and 2023 income statements have been changed, reflecting the discontinued operation of HMMR. The detailed information will be provided through the further disclosure and in this conference call, impacts from the discontinued operation for the fiscal year '22-'23 annual income statements and the 4Q 2022 and 4Q 2023 income statement will be delivered. Consolidated revenue increased by 8.3% year-over-year to KRW 41.7 trillion, and operating income increased by 0.2% year-over-year to KRW 3.5 trillion. The automotive business revenue increased 6.1% year-over-year due to increased volume mix improvement with higher margin vehicles and the operating profit margin on a consolidated basis increased by 3.1% year-over-year. Finance division revenue increased by 29.7% and year-over-year due to strong sales of vehicles and growth in penetration rate. Nevertheless, operating income decreased by 32.1% due to high interest rate. Net income continuing operation base increased by 29.1% year-over-year to KRW 2.7 trillion and loss of discontinued operation due sales of the Russian plant was KRW 457.3 billion, and net income reflecting the loss from the discontinued operation was KRW 2.2 trillion. Next is annual income statement. Annual consolidated revenue increased by 14.4% year-over-year to KRW 162.7 trillion, and operating income increased by 54% to KRW 15.1 trillion with 9.3% operating profit margin. Annual net income increased by 58.4% year-over-year to KRW 13 trillion. Annual loss from discontinued operations due to the sales of Russia plant was KRW 719.7 billion, and net income reflecting loss from discontinued operation was KRW 12.3 trillion. Next is revenue and operating income analysis. Volume effect from sales increase had an impact of KRW 1.6 trillion and despite the increase of incentives, strong sales in North America and the increase in ASP had a positive impact on FX improvement, contributing around KRW 0.6 trillion. Despite the appreciation of Korean won, the revenue increased by 8.3% year-over-year due to revenue increase in finance business and others. Regarding operating profit, volume increase led to a positive impact of KRW 318.5 billion and also increased ASP and sales in advanced markets offset the increased incentive levels leading to a positive mix improvement of KRW 888.9 billion. However, due to the appreciation of Korean won, operating profit increased by 0.2% only. Next is annual revenue and operating income analysis. Volume effect from sales increase had a positive impact of KRW 8.2 trillion. And despite the increase in incentive level, product mix improvement led to KRW 8 trillion increase. Revenue increased by 14.4% year-over-year due to increase of average won to U.S. dollar rate in 2023. Regarding operating profit, volume increase effect had a KRW 1.7 trillion impact, positive mix improvement effect that offset increased incentives had a KRW 2.8 trillion impact, also due to base effect of provision cost in Q3 2022, operating profit increased by 54%. Cost of goods sold ratio increased by 0.3 percentage points to 80%. SG&A increased by 11.7% year-over-year to KRW 4.9 trillion due to increase of labor and R&D costs. Nonoperating income had a decrease in loss and recorded KRW 149.8 billion, due to improvements of P&L in finance, business and others. Net income that includes loss from discontinued operations increased by 28.8% year-over-year to KRW 2.2 trillion due to increase of operating profit. Annual cost of goods sold ratio decreased by 0.7 percentage points to 79.4% due to decrease in raw material prices. Despite the increase of labor and R&D costs, SG&A decreased by 0.5% year-on-year to KRW 18.4 trillion due to a decrease in provision cost. Nonoperating income increased by 83.7% year-over-year to KRW 2.5 trillion. Net income increased by 53.7% year-over-year to KRW 13 trillion due to increase of OP margin. This is the end of our Q4 2023 business results. Thank you. Now [indiscernible], SVP of Planning and Finance Division, will give us the valuation on the fourth quarter results and the year-end dividend.

Good afternoon. I'm [indiscernible], SVP of Planning and Finance Division. I'd like to discuss the Q4 2023 business results. In Q4, despite increased incentives driven by slowing global EV demand and production normalization and the IRA impact and currency depreciation, HMC achieved global wholesale of 1.09 million units, resulting in operating profit of KRW 3.4 trillion and operating profit margin of 8.2% on a consolidated basis. The product mix improved with stable sales of Genesis and stronger sales of high ASP model, such as SUVs and regional mix improved too, with robust sales in the U.S. and Europe. I'd like to now tell you about the sales volume. Recently, the rapid growth of EVs in the automotive market has encountered a slowdown due to various macroeconomic uncertainties, including interest rate hike and inflation. However, through the Hyundai Motor Way announced at the CEO Investor Day in June last year, we are maintaining stable sales and profit by effectively responding to market changes by utilizing our existing lineup of green vehicles, including hybrids and plug-in hybrids. Continued growth in emerging economies like India and Brazil also played a significant role in expanding our sales volume. We are aware of the ongoing concerns in the global automotive industry due to external factors. Despite the concerns, we continued to deliver solid growth in our key markets, including achieving record sales in the U.S. Therefore, we delivered 1.09 million in sales, up 4.9% from a year earlier and up 5% on a consolidated basis, excluding China. In Q4 of 2023, we saw the continued effect from the product mix improvement following prior quarters. SUVs increased 4.4 percentage points year-over-year to 58.8%, our highest SUV share in a single quarter ever. Genesis remains a high-margin vehicle, contributing significantly to our consolidated operating profit. These high-margin vehicles accounted for nearly 60% of our total sales and will work to ensure that this product mix is sustainable going forward. In case of EVs, the worsening sales environment led to a year-over-year decline in sales volume in the fourth quarter, while we are maintaining a low single-digit profit based on the recent strong sales. Hybrids, which have significantly expanded sales during the EV downturn are expected to continue their strong performance in the near term with sales growth of around 60% year-over-year and profitability is already on par with that of conventional ICE or even higher for some models. The solid product mix improvement and flexible market response helped us deliver a solid fourth quarter despite an unfavorable currency environment. Turning to our full year results. Sales were below guidance due to somewhat lower sales in emerging markets compared to our key markets, such as the U.S., Europe and India where we exceeded our business plan. But we significantly exceeded our targets at the beginning of the year with sales of KRW 162.6 trillion and operating margin of 9.3%, driven by continued product and graphical mix improvements and favorable currency impact. Next is incentive that many of you may be concerned about. EV incentives, we raised as part of our IRA response, are stabilizing and incentives for ICE vehicles in the U.S. have consistently remained below the industry average. Moving forward, we'll continue to uphold the profitability focused sales approach in our incentive policies. I'd like to conclude my presentation with a year-end dividend. In line with our mid- to long-term shareholder return policy outlined in our Q1 earnings call, which includes quarterly dividends and the dividend payout ratio of 25% or higher of our consolidated net profit will pay the year-end dividend. The end of the year, dividend will be KRW 8,400 per common share, which is a 25% dividend payout ratio. Regarding the plan to cancel 1% of our existing treasury stock every year will retire 1% in this April. HMC will continue to endeavor to achieving over 25% dividend payout ratio based on stable results going forward. Thanks for listening.

Next is SVP, [indiscernible] from Hyundai Capital, on the 2023 business results and outlook for 2024.

Hello, I'm [indiscernible], Head of Planning and Finance Division of Hyundai Capital. I'll report the full year 2023 business results and outlook for 2024 for the finance business. In 2024, we saw macroeconomic uncertainties in the market, such as economic downturn and high interest rate, while the finance business showed robust performance driven by HMC's strong car sales and solid auto finance portfolio as well as our conservative risk management and outstanding liquidity management capacity. And within the face of the capital market crisis and the capital domestic credit rating was elevated to AA+, solidifying our position as a captive auto financing company. In 2024, we plan to optimize our business portfolio and thus enhance profitability, better manage our asset soundness against any credit risk and expand global finance coverage with HMG in order to bolster our market leadership in the auto finance market. I will now elaborate on the details of Hyundai Capital in HCA. First, Hyundai Capital. Based on the HMC's production normalization and subsequent sales increase as well as strong market demand, our new auto volume increased 17% and assets grew 4% year-over-year. Moreover, supported by the company's stable liquidity, we strengthened the sales support for HMG, expanding the auto finance share in our asset portfolio from 78% at the end of 2022 to 82% at the end of 2023. With more competitive retail products and growing lease demand for high-margin products, the cumulative operating revenue went up 18% in 2023. However, the rapid increase in interest rate and interest cost increased, combined with the overall bad debt cost increase in the financial market, operating profit and pretax income came down approximately 20%. In 2024, we expect uncertainties in the market such as sustained high interest rates and global economic slowdown, still our plan is to focus on improving our fundamentals rather than expanding the size of the business through maintaining focus on auto finance, managing profitability and proactively optimizing costs. Also, we'll continue to work with HMG affiliates for synergistic effects by expanding global coverage and providing financing for CPO vehicles with the aim of building a strong mid- to long-term growth foundation. Next is Hyundai Capital America or HCA. With strong demand from American consumers we saw both cumulative car sales and penetration rate go up in 2023, resulting in the auto financing volume up 53% year-over-year. Also the mix improvement led by SUV and continuous increase of average sales price raised our financial assets by 12% year-over-year. In 2023, operating income was up 12% year-over-year. However, due to interest cost increase from high interest rates and rise in bad debt cost Operating expenses increased to dropping the operating profit by 39% year-over-year. In terms of credit risk, the share of prime customers was raised to 89% in Q4 2023 defending our asset soundness and issued global bonds worth USD 9 billion, 4 times throughout 2023, proactively securing liquidity. Next is our outlook on 2024. A soft landing is expected with lower inflation and falling rates, but uncertainties are still looming for 2024. Therefore, HCA will strengthen the management of residual values and borrowing portfolio to minimize the impact on our profit. Also will foster better cooperation with HMG affiliates by supporting mobility business operations, improving financing and EV sales support. This is all for my presentation. Thank you for your attention.

Next, [indiscernible], Head of the IR Group of HMC, will give us the presentation on the guidance.

Good afternoon. I am [indiscernible], Head of the IR. Since 2021, we have been providing annual guidance for our automotive business and since 2022 for our consolidated business as part of our business transparency efforts. Throughout the year, we regularly update this guidance to reflect both internal and external changes in the business landscape. This practice aims to improve the visibility and confidence of our shareholders and investors in our performance. For 2024, our sales target is set at 4.24 million units, up 26,000 units year-over-year, as announced earlier this year in line with global industry demand. Please see Page 2 for sales targets by region. On a consolidated basis for 2024, we anticipate a sales growth of between 4% to 5% year-over-year, driven by higher North American sales volumes and ongoing rises and ASPs. For operating margin in 2024 on a consolidated basis, we are targeting an operating margin of 8% to 9% considering the positive effects of ongoing improvements in product mix and cost competitiveness enhancement despite the deteriorating external business environment, including FX rate, interest rates and concerns about global demand contraction. Our investment plan for the year is KRW 12.4 trillion, up 3.3% from a year earlier. We are allocating KRW 4.9 trillion for R&D, marking a 19.5% rise from the previous year to support the increasing number of vehicles to be produced, including EVs, Genesis and [ end ] brands and secure future technologies for the SUV transition. For CapEx, we plan to invest KRW 5.6 trillion, down 13.8% from 2023. And for strategic investments, we plan to invest KRW 1.9 trillion or 23.7% increase. Regarding free cash flow. Our revised expectation is a range between KRW 2.5 trillion to KRW 4 trillion, down KRW 0.5 trillion from our previous guidance of KRW 3 trillion to KRW 4.5 trillion, reflecting continued shareholder returns and increase in investment. Regarding our shareholder return policy, we remain committed to the mid- to long-term approach announced on April 25, 2023, including dividend payout ratio of 25% or higher, quarterly dividends from Q2 2023 and cancelling 1% treasury stocks every year for the next 3 years. We'll continue to keep up with the policy to benefit our shareholders. In 2024, we will strive to meet our 2024 annual guidance, building on improving profitability fundamentals and prioritizing continued profit creation and shareholder value. For more information, please refer to the 2024 guidance information available on our website. This is all for 2024 guidance presentation. Thank you.

That is all, and we'll now begin the Q&A session.

[Operator Instructions] The first question will be provided by Kyung Jae Hwang from Merrill Lynch Securities.

I'm Kyung Jae Hwang from the Merrill Lynch Securities. With regards to the business plan this year, when I take a look at the North America's first half, instead of going eco-friendly Santa Fe or Tucson Facelift NGV AV and other new lineups are in queue. And I think there will be a lot of benefits if you utilize incentives correctly. And with regards to that, can you share the direction forth?

Thank you for the question. As you said, we are queuing for Santa Fe for more change and to some facelift and introduction of [GV AV]. And -- but the incentive right now is downwards to the manageable level. We have injected a lot of incentives to respond to the IRA. So if you separate the ICE models with EV models, you can see that ICE models are below average, industry average. And as I said, if we introduce Santa Se and Tucson Facelift for the ICE models, we'll be able to manage incentives more easily, and the average will go down a little bit more.

The following question will be presented by Eun Young Yim from Samsung Securities.

I'm Eun Young Yim from Samsung Securities. I have two questions. The first part of my question is on the guidance. According to the audit result -- audit report that has been released, I believe that from Q3 2023, the material costs have been constantly coming down, which will, I believe, have a good impact on an annual basis. However, according to the guidance, the profitability guidance is similar to last year. So I was wondering about the reason why you're taking a conservative approach to the profitability guidance? Is it because of the finance business? And if so, then how do you believe the upside in that business would be with the falling interest rates? So what is your outlook on the finance business under HMG? And my second question is regarding the dividend. I believe it is very positive that you're keeping your dividend policy that was announced last year. However, the impact on the stock price seems to be quite marginal compared to KIA. So I was thinking maybe the management is expecting the company to cancel additional treasury stock. So what do you think is necessary for the company to consider additional retirement of the treasury stock? Is it liquidity or is there any other element that is required for you to consider additional cancellation of the treasury stock?

Yes. On your question, I believe this is about the -- first of all, the guidance, as suggested in the audit report, yes, compared to the first half of last year, the material costs have come down in the second half in this year. So your question was about why we are taking the conservative guidance on profitability even if the costs are falling? The costs are falling because, first of all, because of our efforts to reduce the cost. And second of all, the battery materials, battery raw materials costs are coming down in the second half compared to the first half or early 2023. However, the battery raw material prices are quite volatile, so we do not really know where to go with the price of battery raw materials. However, what's clean -- what's clear is that the cost is falling, yes. And also, we have another factor at play, which is $1 rate. In our business plan, we are projecting [ KRW 1,271 to $1 ] which is lower than last year's. However, the first rate is appreciating again to KRW 1,320 this year. And at once even touched KRW 1,330. So this will definitely have a positive impact on our performance. And if this continues, we will be able to achieve the guidance and we might even be able to overachieve it. And for your second part of the question, Hyundai Capital will give you the answer.

Yes, I'm SVP [indiscernible] of Hyundai Capital. Yes, as you said in 2023, the profit and loss of Hyundai Capital and Hyundai Capital America were quite were not as expected because of the rising interest rate and resultant interest spending as well as the cost of that debt. A lot of the elements were going backwards to pre-COVID levels. However, the situation will recover in 2024. Therefore Hyundai Capital and Hyundai Capital America will resume its growth in 2024 compared to 2023, but not so much, but it will be recovered slightly. However, it will not be big enough to have an impact on the operating profit margin of HMC.

Yes. On the second part of the question regarding the cancellation of our treasury stock, your question was, if there is any role or standard for us to consider additional cancellation of the treasury stock? As announced in our guidance and our dividend policy, we'll continue to achieve over 25% dividend payout ratio and 1% cancellation of treasury stock over the next 3 years. We'll keep that promises. We currently have the dividend -- excuse me, we have -- currently have the treasury stock holding of 4% and 1% cancellation requires KRW 400 billion. So when we complete the cancellation of 3% of the treasury stock holdings that we have, we'll have 1% remaining. So at that moment or maybe before that, we'll consider your suggestion or any other way to bring back the benefit to our shareholders. So we are committed to keeping our promises regarding the shareholder return policy.

The following question will be presented by [indiscernible] from JPMorgan Asset Management.

So I have two questions. So the first one is on the recent slowdown of EV adoption in the U.S. and also in Europe. So in general, how does this trend impact Hyundai? What is your plan in terms of adopting to this new trend? And also in terms of hybrid vehicles, what's your plan in terms of growing this segment for 2024?

Yes. This is [indiscernible], Head of IR. I think your first and second question we can kind of combine it into one. But generally speaking, as you mentioned, the BEV market has definitely been slowing down. However, our overall outlook or direction that we have pointed out during the CEO Investor Day of achieving about 2 million unit sales by 2030 still holds. Of course, it's not going to be a linear growth. We will definitely see a bit of a hiccup or ups and downs. But nevertheless, we will continue with that. This year, our forecast for pure EV, BEVs is about 300,000 units, which represents about a 12% growth over last year, what we achieved last year of about 270,000 units. And as you mentioned, I mean, again, as we mentioned during the CEO Investor Day, one of our strengths, we believe, is our flexibility in what we call the Hyundai Motor Way, enabled to produce ship from the ICE models to the eco-friendly BEV models, et cetera. And with the growing demand towards HEV, this year, actually, we're projecting about a 28% growth in the hybrids, reaching -- our target for this year is approximately 480,000 units. Last year, we achieved about 370,000 units. So that represents about 11% of our total sales. And last year was about 9%. And if you recall the numbers that we presented by 2030, hybrid has actually also been a very strong contributor. By 2030, we estimate the hybrids will account for about 15%. The BEVs will account for about 34%. So those 2 collectively will represent about 50% of our sales in 2030.

The following question will be presented by Akimi Matsuda from PIMCO Japan Ltd.

Sorry for -- maybe I missed some information on the website. But if you could actually let me know what your total level of debt for -- as of the end of the year and also net assets and net cash position at the OEM? That's my first question on the financial. And then my second question is, can you also a little bit share the background to increase in penetration of hybrids in Korea instead of BEV.

Hold on second, I need to find the numbers, okay? Can you hold one second?

Of course.

[Foreign Language]

Okay. Let me still try to find the other numbers. But for the net cash position ex finance right now, we're currently at about a little over KRW 16 trillion. So it's gone up from about KRW 14.6 trillion. So it's gone up a little bit, excluding the finance side. The other numbers -- we -- if it's okay, can we actually send it to you by e-mail because I don't have those numbers on top of my head. If that's okay, we'll get back to you by e-mail on those numbers. And in terms of the -- second question was what -- sorry? Okay. We hold on a second, we need some numbers again. Anyway as I mentioned earlier, the total hybrid -- you just want for the domestic side, right?

That is correct.

Because, yes, I mean, I mentioned that total hybrid accounted for about 9%. I think for domestic is a little bit higher. It's about 20% for this year projection for the hybrids. So 13 -- '24 is -- sorry, about 20% is the penetration for '24. Last year, '23, was about 18%.

This is the end of the 4Q 2023 earnings call. Thank you for joining. If you have any questions, please contact Hyundai Motor's IR team. Thank you very much for your attention.