Kia’s net profit up 5 pc to $2.1 bn on pricier models, weak currency

Seoul, July 26: Kia, South Korea’s second-largest automaker, said on Friday its second-quarter net profit rose 5 per cent from a year ago, helped by the company’s sales focus on pricier models and a weak won.

Net profit for the April-June period came to 2.95 trillion won ($2.1 billion) on a consolidated basis, compared with a profit of 2.81 trillion won a year ago, the company said in a regulatory filing.

Operating profit reached a quarterly record of 3.64 trillion won, up 7.1 per cent from a year ago. Sales jumped 5 percent to 26.56 trillion won.

The earnings failed to meet market expectations. The average estimate of net profit by analysts stood at 2.99 trillion won, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

Kia said it sold 795,183 vehicle units during the three-month period, down 1.6 percent from last year, due to production gaps from the electrification conversion of domestic and overseas factories, insufficient inventory and the discontinuation of some small car models.

The company, however, enjoyed improved profitability thanks to an improved product mix focusing on high-profit vehicles and improved sales in advanced markets, such as the United States.

The company also cited reduced raw material costs and favorable exchange rates of the Korean won for the overall improved profitability, the company said.

Domestic sales decreased 8.4 per cent on-year due to a high baseline effect from the previous year when the individual consumption tax reduction was in effect.

On the contrary, overseas sales saw overall growth. Led by sales in North America, particularly the United States, strong demand continued, driving increased sales of major SUV models.

Sales in Europe and India, however, faced setbacks due to the electrification transition of Kia’s plant in Gwangmyeong, south of Seoul, and aging of some of Kia’s models.

In the second quarter, Kia’s sales of eco-friendly vehicles increased by 8.3 percent on-year to 162,000 units, despite the global slowdown in electric vehicle growth, thanks to the launch of the new EV9 and continued expansion of hybrid model sales.

The proportion of eco-friendly vehicle sales out of total sales also rose by 2.5 percentage points compared to the previous year, reaching 21.4 percent.

Kia said it anticipates that the challenging business environment will continue due to ongoing geopolitical risks, increased volatility from changes in leadership in major countries and weakened consumer purchasing sentiment resulting from high interest rates and inflation.

The company said it plans to enhance profitability and increase customer value by maintaining appropriate inventory levels and operating optimal incentive strategies through a flexible production system based on market conditions and demand.