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Kia Second-Quarter Profit Rises 67 Percent on Gains in U.S. Sales of SUVs, Sedans

July 28, 2011
3 min to read


Kia Motors Corp., the world’s best- performing major auto stock this year, posted a 67 percent increase in second-quarter profit as it sold more sedans and sports utility vehicles in the U.S.


Net income was 1.13 trillion won ($1.07 billion) in the three months ended June 30, up from a revised 676.1 billion won a year earlier, the Seoul-based company said in a regulatory filing today. This compares with the 913 billion won average of six analyst estimates compiled by Bloomberg.

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Kia sold 21 percent more cars than a year earlier, boosted by a 36 percent surge in exports to the U.S., where the company sold more K-5 sedans and Sorento SUVs. Deliveries in the U.S. will keep rising this quarter while Kia’s market share may slip as Japanese automakers return production to normal levels after the March earthquake, said Yim Eun Young, an analyst at Dongbu Securities Co.


“As long as the company retains the current sales volume, the impact on profits will not be that big,” Yim, who is based in Seoul, said before the announcement. “What Kia has to look out for in the second half is the impact of the strong Korean currency.”


Kia’s shares rose 0.8 percent to 78,100 won at 10:51 a.m. in Seoul. The stock has surged 54 percent this year, the most of 26 major automakers tracked by the Bloomberg World Auto Manufacturers Index.


The won has advanced 6.4 percent this year, making it Asia’s second-best-performing currency in 2011. It is forecast to strengthen to 1,050 won per dollar this quarter, according to estimates compiled by Bloomberg. A stronger won hurts South Korea’s exporters because it cuts the value of repatriated earnings.


“The strong won will make it difficult, but we are confident that we will be able to continue profitable performance,” Lee Jae Rok, Kia’s chief financial officer, said in a briefing in Seoul. “Profits will continue to increase with new model releases in the second half.”

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The automaker will introduce a large luxury sedan in early 2012, Lee said. Overseas demand for its Forte and Pride models continues to rise, he said.


Operating profit, or sales minus the cost of goods and administrative expenses, rose 56 percent to 1.03 trillion won from 662.2 billion won, the carmaker said. Sales by value rose 25 percent to 11.58 trillion won.


The sales of vehicles produced in the U.S. almost doubled in the second quarter from year earlier, according to data on Kia’s website. The carmaker’s U.S. market share rose to 3.9 percent in the first half from 3 percent a year earlier, the company said today.


In China, Kia sold 190,000 vehicles in the first six months, an increase of 18 percent from a year earlier, the company said.


Kia, South Korea’s second-largest automaker, sold 621,000 units in the April to June period, 21 percent more than the previous year, according to a regulatory filing. Hyundai Motor Co., which owns 34 percent of Kia, yesterday reported that second-quarter profit rose to 2.3 trillion won from 1.68 trillion a year earlier, as the company increased production to fill the void left by disruptions at Japanese rivals.

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