Q4 Sales of 16.1 Trillion KRW, Operating Profit of 590.5 Billion KRW... Up 19.5% and 54.6% Year-on-Year
[Asia Economy Reporter Kum Bo-ryeong] Kia Motors has shown a steady recovery trend.
According to Shinhan Financial Investment on the 26th, Kia Motors recorded sales of 16.1 trillion KRW and an operating profit of 590.5 billion KRW in the fourth quarter of last year. These figures represent increases of 19.5% and 54.6% respectively compared to the previous year.
Considering the approximately 40 billion KRW loss reflected due to partial strikes caused by delays in labor-management negotiations, these are regarded as favorable numbers. Breaking down the 208.5 billion KRW increase in operating profit, the largest factor was a 313 billion KRW improvement from mix enhancement through new car effects and reduced incentives. Exchange rate and other factors also contributed to an improvement of about 37 billion KRW.
Concerns about profit deterioration due to the electrification drive are expected to gradually ease. Jeong Yong-jin, a researcher at Shinhan Financial Investment, explained, "Looking at Kia Motors’ mid- to long-term business plan announced earlier this year, we could see a focus on electrification. They plan to aggressively expand sales of electrified vehicles in line with the tightening environmental regulations in Europe this year. However, there was concern that the electrification drive might severely damage profits. The reason for the spread of this concern was the assumption that electrified vehicles would incur large losses. Through previous briefings and this earnings conference, we confirmed that the loss margin of electrified vehicles is not large, and there is almost no profit difference with small gasoline vehicles whose sales will be reduced in Europe. It is highly likely that the profit deterioration in Europe will end up being an unfounded worry."
The second half of the year, when sales of Kia’s main new models, Sorento and K5, will be in full swing, is highly anticipated. Kim Pyeong-mo, a researcher at DB Financial Investment, said, "Until the first half, relative domestic sales sluggishness due to competitors’ new car sales and a high base effect from one-time gains in the first quarter of last year are expected to slow performance improvement. However, in the second half, the Indian subsidiary is expected to turn profitable and the new car effect will be in full swing. Accordingly, Kia Motors’ operating profit this year is expected to increase by 11% from the previous year to 2.239 trillion KRW, in line with consensus."
Kia Motors plans to make aggressive investments to secure a leading position in the electric vehicle sector. Compared to Hyundai Motors, which pursues a hydrogen vehicle strategy in parallel, Kia may stand out in the electric vehicle market. Additionally, a brand image change is expected as they are considering an emblem change in the second half of this year.
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