How did carmakers fare in Hungary in 2020? - Audi to pay gargantuan dividend
Saying that 2020 was an extremely hard year full of challenges for the Hungarian car industry barely scratches the surface. The unexpected appearance of the coronavirus and the strict measures implemented to control the spread of the virus led to several temporary production halts. As a result, factories in Hungary produced some 92,000 fewer cars. Meanwhile, the pandemic had an uneven effect on Hungarian operations as premium manufacturers Audi and Mercedes-Benz suffered less from the crisis and their output remained relatively high, while volume manufacturer Suzuki saw a major slump last year.
Audi hasn’t been this profitable for a long while
As we learned in January, Audi Hungaria was the largest engine manufacturer in the world last year, producing 1,661,599 engines, including 87,343 electric engines as part of its e-mobility drive.
The more than 1.66 million engines made last year were nearly 16% fewer than in 2019. The primary cause of the double-digit decrease was the coronavirus pandemic and the strict measures taken to combat it, which have set back car sales significantly across the globe in 2020. Lower demand for cars obviously also meant lower demand for engines.
Car production remained strong despite the pandemic, with Audi manufacturing 155,157 cars in 2020, a mere 6% decrease compared to the previous year.
Even amidst the challenging operating environment, this was the third highest annual output for Audi’s local unit after 209 (164,817 cars) and 2015 (160,226 cars).
As for individual models, workers in Győr made 94,659 Audi Q3 and 47,232 Audi Q3 Sportback cars last year, along with 6,793 Audi TT Coupé and 1,853 Audi TT Roadster models. 4,620 Audi A3 Cabriolet cars were also manufactured in 2020.
At Audi Hungaria’s annual press conference in March, Patrick Heinecke, Member of the Board of Management for Finance, IT, Purchasing, and Compliance, said
Audi Hungaria had sales of EUR 7.518 bn last year, as 12% decrease compared to the record-breaking 2019 figure.
Material costs were 15% lower and personnel costs more than 8% lower than a year earlier, with the former attributable to lower production and the latter to temporary production halts and the gradual ramping up of production that followed. Depreciation, another significant item, decreased from EUR 725 million in 2019 to EUR 524 mn last year.
Audi Hungaria’s operating profit was EUR 452 mn last year, nearly 59% higher than in 2019. Operating margin rose to 6%, the highest in nine years.
Pre-tax profit was EUR 500.3 mn, nearly 41% higher than in 2019, while net profit also rose 41% to EUR 499.1 mn.
Based on the above, we can say Audi Hungaria had its strongest result for the past several years, which is a genuine surprise given the conditions.
Audi Hungaria to pay a staggering dividend
It is important to understand that the coronavirus pandemic put the entire global car industry in a very difficult situation, and ensuring liquidity was of key importance for major market players. It is probably partly because of this that
Audi Hungaria will pay an unprecedented amount, EUR 6 bn (about HUF 2,076 bn) in dividend to parent company Audi AG.
In order to understand how Audi Hungaria is able to pay such a huge dividend, it should be recalled that the company lowered its EUR 6,000,201,000 share capital by EUR 6 bn last year in order to increase other elements of its equity, by revoking 60 million EUR 100 dematerialised ordinary shares. As a result, Audi Hungaria’s share capital dropped to just EUR 201,000, while the EUR 6 bn amount was placed in profit reserve.
The decision on using after-tax profit now published by the company reveals that
the sole shareholder decided to pay EUR 6 bn in dividend on the after-tax profit of the previous year and the accumulated profit reserve, considering that the legal requirements for paying dividend were met based on the 2020 report.
Two things should be noted regarding the above:
- The current EUR 6 bn dividend is more than the EUR 5 bn combined Audi Hungaria has paid since 2007.
- The Hungarian unit is paying parent company Audi AG EUR 8 bn (about HUF 2,768 bn) in dividend in two years.
Mercedes plant in Kecskemét feels impact of coronavirus pandemic
The Mercedes-Benz factory in Kecskemét manufactured more than 160,000 cars last year, compared to more than 190,000 in 2019.
It should be noted, however, that last year’s production was not a bad result, as the Hungarian operation was forced to halt production three separate times due to the coronavirus pandemic as well as during reconstruction and maintenance works.
With the lower production volume, the company’s sales came to EUR 3.4 bn last year, 8% lower than in record-breaking 2019 figure.
The annual report shows that material costs, which have a decisive weight in Mercedes-Benz Manufacturing Hungary’s operation, dropped from EUR 3.37 bn to EUR 3.13 bn last year. As a result of temporary breaks and the gradual ramping up of production, personnel costs were EUR 97 million last year, down 11% from 2019.
Operating profit was more than EUR 55 million last year, 47% lower than in 2019. This also meant that the operating margin decreased to 1.6%, the lowest since the plant began mass production.
Mercedes-Benz Manufacturing Hungary had pre-tax profit of nearly EUR 41,5 mn in 2020, a 58% decrease year on year. Net profit was also down 58% and came to EUR 39 mn.
This also meant that the Kecskemét factory’s after-tax profit dropped to its lowest since the beginning of mass production, following a record-breaking 2019.
The supplementary appendix released by the company shows that the owners will decide on dividend payment when approving the annual report, but the preliminary statement indicates that the company will pay a dividend to its parent company on its 2020 profit.
The expected dividend is the full 2020 after-tax profit, EUR 39.3 mn (approx. HUF 13.8 bn).
Magyar Suzuki hit hardest by coronavirus crisis
The coronavirus pandemic had a very strong negative effect on Magyar Suzuki’s 2020 performance. The volume manufacturer produced just 112,475 cars last year, a 37% decrease compared to 2019.
This was the lowest production volume in the Esztergom plant in the past 16 years.
Sales in the European Union, the company’s main market, dropped dramatically last spring, and recovery was much slower than most in the industry had expected.
The annual report also shows that the decisive material costs decreased from EUR 2.12 bn in 2019 to EUR 1.55 bn last year. Personnel costs did not change significantly, but other costs dropped to EUR 250 mn from EUR 336.9 mn in 2019.
Operating profit was EUR 24.6 mn, more than 73% less than in 2019, and the operating margin decreased to 1.5%, the lowest since 2014.
Magyar Suzuki’s after-tax profit was more than EUR 20 mn in 2020, 76% less than a year earlier.
As in previous years, the company will not pay a dividend on its after-tax profit.
Cover photo: MTI/Csaba Krizsán
