Kia Motors Profit Exceeds Estimates on Higher Sales in China

Kia Motors Corp. (000270)’s second-quarter profit beat analysts’ estimates after South Korea’s second-largest carmaker sold more vehicles in China.

Net income excluding minority interests rose 7.7 percent to 1.18 trillion won ($1.06 billion), compared with 1.1 trillion won a year earlier, the Seoul-based company said in a statement today. Profit exceeded the 1.05 trillion won average of 18 analysts’ estimates compiled by Bloomberg in the past 28 days. Revenue increased 4.5 percent to 13.1 trillion won.

Kia’s sales in China have jumped 22 percent on higher demand for its K3 sedan, while its Sportage sport-utility vehicle lifted deliveries by 1.5 percent in Europe, helping the automaker buck an industrywide slump in the region. The gains countered falling demand for its vehicles in the U.S., Kia’s biggest market, and in South Korea.

“Kia exceeded expectations today, thanks to increasing sales in China,” said Lee Sang Hyun, an auto analyst at NH Investment & Securities Co. “Moving forward, things look good for the company, especially with its new model the Soul wagon scheduled to be unveiled in the second half.”

Operating profit, or sales minus the cost of goods sold and administrative expenses, fell 8.5 percent to 1.13 trillion won. That compares with the 1.01 trillion won average of 18 analysts’ estimates compiled by Bloomberg.

Kia rose 0.7 percent to 61,200 won at the close in Seoul trading. The benchmark Kospi index gained 0.1 percent.

China Sales

Kia’s deliveries in China increased, helped by its K3 small sedan introduced in the country in October. Sales from its China factory rose 24 percent, according to data on the automaker’s website.

The company revised its sales target in China for this year to at least 520,000 units, up from 500,000 units, Chief Financial Officer Park Han Woo said during a conference call in Seoul today. Production will also increase next year when its third plant in the country starts operations as early as March, Park said.

Kia’s sales advanced 1.5 percent in Europe, led by sales of Sportage sport-utility vehicle and the new Cee’d hatchback. Industrywide deliveries in the region declined 4.1 percent, according to data compiled by Bloomberg.

Higher Incentives

Kia spent 19 percent more on incentive costs for passenger cars in the U.S. last quarter, according to Autodata. Its sales fell 0.2 percent last quarter, compared with the industrywide growth of 8.5 percent, according to company data.

The won strengthened 2.4 percent against the yen last quarter, curbing Kia and Hyundai Motor Co. (005380)’s competitiveness against Japanese automakers.

Sales at home fell 4 percent from a year earlier. The automaker in June started the planned increase in production of vehicles at its Gwangju factory. The output will be raised to 620,000 units from 500,000, enabling Kia to export more vehicles.

Kia’s sales dropped 3.7 percent in Latin America, while industrywide deliveries in the region increased 7.9 percent, according to data compiled by Bloomberg. Sales fell 9.1 percent in the Asia-Pacific region, excluding South Korea and China, according to company data on its website.

Hyundai Motor, which owns 34 percent of Kia, yesterday reported second-quarter profit fell to 2.4 trillion won, beating the 2.37 trillion won average of 15 analyst estimates compiled by Bloomberg for 28 days.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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