Kia Motors net earnings plunge 13.3 percent in Q2

July 25, 2014

(Yonhap) — Kia Motors Corp., South Korea’s No. 2 automaker, said Friday its net earnings for the second quarter plunged 13.3 percent on-year to 1.02 trillion won (US$988 million), due to unfavorable exchange rates that offset gains in the total number of cars it sold.

Operating profit also nosedived 31.7 percent to 769.7 billion won in the same period, with earnings generated by sales falling 8.1 percent to 12.05 trillion won, the company said in a regulatory filing.

Kia reported selling 775,253 cars in the three-month period, a gain of 4.3 percent from 743,236 units sold a year earlier.

The company said with overseas sales and exports accounting for 75 percent of its business, the sharp appreciation of the Korean won vis-a-vis the U.S. dollar seriously hurt earnings in the three-month period.

“Solid demand for Kia cars and aggressive marketing strategies that refrained from offering discounts helped stem further drops in earnings,” the company said in a press release.

The Korean won appreciated 5.1 percent against the dollar in the first half of 2014 compared to the same six-month period last year.

For the first half, the carmaker’s bottom line backtracked 3.3 percent to just over 1.9 trillion won, with its operating profit falling a sharp 17.8 percent to 1.5 trillion won. Earnings generated by sales reached 23.98 trillion won, a dip of 0.9 percent on-year, with the total number of cars sold gaining 7 percent to 1,547,123 units.

On company outlook, Kia said stiff competition from rivals and concerns of a growth slowdown in places like China may pose more challenges to the carmaker.

With the Korean currency in the 1,020 won range to the U.S. greenback, Kia must take aggressive measures to defend its profitability by enhancing efficiency in production and sales, it said.

The company said it hopes to boost profit with the full-fledged launch of its Soul electric car and its new Sedona minivan in overseas markets in the second half, as well as the unveiling of the redesigned Sorento midsize SUV in its home market.