Earnings Surprise Kia Motors Recovers Operating Profit to 2 Trillion Won Range... SUV and Exchange Rate Effects (Comprehensive)

Improved Sales Mix and Exchange Rate Effects... Recovery After 3 Years
Strong Performance Despite Sales Decline... Targeting 2.96 Million Units Next Year

[Asia Economy Reporter Kiho Sung] Kia Motors has recovered its operating profit to the 2 trillion KRW level for the first time in three years, thanks to its SUV mix strategy and the new K5 model. Kia had recorded operating profits in the mid-2 trillion KRW range annually but plunged to around 600 billion KRW in 2017 due to the THAAD (Terminal High Altitude Area Defense) incident. This year, Kia has set its 2020 sales target at 2.96 million units (including CKD), a 4.9% increase from last year's performance.

On the 22nd, Kia held its 2019 annual business performance conference call at its headquarters in Yangjae-dong, Seoul, announcing last year's annual sales of 2,772,076 units, revenue of 58.146 trillion KRW, and operating profit of 2.0097 trillion KRW.

Despite quality-related costs incurred in the third quarter of last year, overall profitability improvements such as sales mix enhancement, inventory stabilization, and incentive reduction, along with favorable exchange rates and the effect of the first quarter's wage refund, had a significant impact.

Moreover, the Telluride, which successfully established itself in the fiercely competitive U.S. large SUV market by selling nearly 60,000 units (58,604 units sold locally), greatly contributed to Kia's revenue growth and profitability enhancement.

◆ In Q4 last year, sales decreased but revenue and profit increased=In the fourth quarter of last year (October to December), Kia's sales recorded 144,888 units domestically, up 5.8 percentage points from the previous year, and 583,408 units overseas, down 3.1 percentage points from the previous year, totaling 728,296 units, a 1.4 percentage point decrease compared to the previous year.

On the other hand, fourth-quarter revenue increased by 19.5% year-on-year to 16.1055 trillion KRW, driven by successful new car sales in key markets such as Korea and the U.S., expanded sales of higher-priced SUVs and eco-friendly vehicles, and favorable exchange rate effects.

As a result, fourth-quarter operating profit rose 54.6% year-on-year to 590.5 billion KRW, and the operating profit margin increased by 0.9 percentage points to 3.7%.

◆ Sales target of 2.96 million units this year=The global automobile market is expected to continue its low-growth trend this year. However, Kia plans to expand sales in the global market and continuously improve profitability by leveraging the 'Golden Cycle' of concentrated core new model launches starting from the end of last year.

The 2020 sales target is set at 2.96 million units (including CKD), a 4.9 percentage point increase from last year's results. The domestic market target is about 520,000 units, similar to the previous year, while the overseas target is approximately 2.44 million units, about a 6% increase from last year.

To achieve this, Kia plans a mid- to long-term strategy including ▲a proactive transition to electric vehicles with a full lineup of 11 electric vehicle models across all segments by 2025, including dedicated electric vehicle models, aiming for a 6.6% global electric vehicle market share ▲the 'Plan S' strategy focusing on mobility services based on autonomous driving and connectivity technologies ▲and laying the foundation to achieve a financial goal of a 6% operating profit margin by 2025.