Kia Motors Corp., South Korea’s second largest carmaker, reported profit that missed analysts’ estimates after labor protests led to the company’s second-worst strike in the past decade.
Third-quarter net income rose 28 percent to 829.5 billion won ($756 million), compared with 647.9 billion won a year earlier, the Seoul-based company said in a statement today. That missed the 974.6 billion won average of 28 analyst estimates compiled by Bloomberg.
The stock fell the most in five months in Seoul trading as the company cut next year’s production target after the nine-week dispute with its union cost Kia an estimated 1.03 trillion won in lost output. By volume, it was the worst strike as the stoppages prevented the company from producing 62,890 vehicles.
“The biggest disappointment is Kia’s production plans for next year,” Lee Sang Hyun, an analyst at NH Investment & Securities Co. said by telephone. The revision, coupled with the strengthening won, makes next year’s prospects for export-dependent Kia look bleak, he said.
The automaker lowered next year’s production target to 2.8 million units, versus an earlier goal of 3 million, Joo Woo Jeong, head of the financial management group, said in a conference call today. Output will reach 3 million after Kia’s new plant in China starts production in 2014, he said.
Kia fell 5.6 percent to close at 62,300 won, its biggest decline since May. The benchmark Kospi stock index dropped 1.7 percent.
Chief Financial Officer Park Han Woo expressed his concerns about the strengthening won, the best performing major currency in the past month.
“The strengthening won may hurt the company’s profitability moving forward,” Park said during a conference call today.
Operating profit in the quarter rose 4.1 percent to 861.2 billion won, versus the 984.1 billion won average estimate compiled by Bloomberg.
Kia’s deliveries increased 0.3 percent last quarter, compared with a year earlier, according to the e-mailed statement. It’s the first time since the fourth quarter of 2007 that the company’s sales grew at a slower pace than the industry, according to Bloomberg Industries.
Kia on Sept. 14 agreed to raise compensation, on average, by 22.7 million won per person and cease overnight shifts, according to its union. That ended the strikes, Kia’s first since 2009, which began mid-July and caused a record 62,890 vehicles in lost output, according to company estimates.
The stoppages led third-quarter exports from South Korea, which accounts for 62 percent of the automaker’s production capacity, to fall 9.2 percent, according to the company’s website. Sales at home shrank 6.6 percent.
For the past decade, the company estimates labor disputes deprived the carmaker of 5.54 trillion won in revenue and 365,504 vehicles in lost production.
Kia, which is 34 percent owned by Hyundai Motor Co., expects to sell 730,000 vehicles this quarter, which would allow the company to beat its full-year target of 2.71 million units, said Joo, head of the financial management group.
Kia and Hyundai Motor, both headed by Chairman Chung Mong Koo, said earlier this month that combined sales in China will probably exceed their target of 1.25 million units after September deliveries climbed to a record. Kia’s own sales in the country climbed 8.3 percent last quarter.
Consumers in China avoided buying Japanese-branded vehicles after rioters torched dealerships and smashed cars after Japan’s government last month bought a group of islands claimed by both countries. Sales of Japanese brands tumbled 41 percent in September in the world’s biggest car market, the state-backed China Association of Automobile Manufacturers said this month.
In the U.S., Kia’s biggest market, the automaker’s third-quarter sales rose 20 percent, exceeding the industry’s 14 percent gain, as deliveries of its Optima mid-size sedan doubled and sales of Soul wagons gained 26 percent.
Kia’s plants in U.S. that began production of the Optima in September last year helped offset production disruptions from its South Korean plant, accounting for 76 percent of Optimas sold in the U.S. last quarter.
In the European market, which is headed for its fifth consecutive year of declining vehicle sales, Kia gained market share as it benefited from demand for Sportage SUVs and the Europe specific new Cee’d hatchback.
Deliveries of the new Cee’d and Sportage, which are produced in Kia’s plant in Slovakia for the European market, helped boost deliveries in the region by 12 percent in the quarter.
Hyundai, Kia’s biggest shareholder and the country’s largest automaker, yesterday reported a 13 percent increase in third-quarter profit.