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Kia Motors Profit Beats Estimates on U.S. Vehicle Demand

Kia Motors Profit Rises 26% on Vehicle Sales in U.S., Europe
A worker inspects Kia Motors Corp. vehicles bound for export at the port in Mokpo, South Korea. Photographer: SeongJoon Cho/Bloomberg

Kia Motors Corp., South Korea’s second-largest carmaker, posted first-quarter profit that beat analyst estimates as demand for Rio compacts and Sportage sport-utility vehicles boosted sales overseas more than forecast.

Net income rose 26 percent to 1.2 trillion won ($1.1 billion) in the three months ended March from 953.2 billion won a year earlier, the Seoul-based carmaker said in a regulatory filing today. That compares with the 948.4 billion won average of 26 analysts’ estimates compiled by Bloomberg.

First-quarter vehicle sales in the U.S. rose a revised 32 percent, more than triple the pace of Kia’s annual target, with an increase of 25 percent in Europe and 15 percent in China as its models gained popularity in export markets. The Hyundai Motor Co. affiliate said in January it’s targeting growth of 10 percent in the U.S. and 23 percent in Europe.

“The company’s global sales trend will continue,” said Shin Chung Kwan, an analyst at KB Investment & Securities Co. “Kia’s sales in the domestic market, where it struggled last quarter, will also grow as it launches the new K series models scheduled to be released this year.”

Operating profit, or sales minus the cost of goods sold and administrative expenses, increased 33 percent to 1.12 trillion won, the company said.

Sales rose 11 percent to 11.8 trillion won, beating the 11.5 trillion won average of 26 analysts’ estimates.

Production Capacity

Kia shares rose 1.4 percent to 80,700 won at the close in Seoul, compared with the Kospi index’s 0.6 percent gain. The stock has risen 21 percent this year.

Hyundai Motor, which owns 34 percent of Kia, yesterday reported first-quarter profit rose 31 percent to 2.45 trillion won.

The company currently has capacity to produce 2.8 million or more vehicles this year, said Joo Woo Jeong, head of financial management at Kia, in a conference call today.

“This is more than our original sales target of 2.7 million,” said Joo. “We expect sales to exceed the target.”

Kia plans to start construction of its third plant in China in June, and may start production earlier than planned, Joo said.

The automaker aims to sell 2,000 to 2,500 units of the new K9 luxury sedan per month in Korea, said Min Chung Sik, head of Kia’s investor relations team. The company currently estimates pre-orders of the K9 to be at around 3,000 units. Kia is carefully considering exporting the new sedan, Min said.

Kia plans to introduce the new C’eed hatchback in Europe and the K3 small sedan in China this year, Min said.

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