Kia Increases Profits by Controlling Quality and Costs... Earns 2.8 Trillion Won in Q3 (Update)

Q3 Business Performance Announcement
Operating Profit Margin 10.9%
Double Digits for 8 Consecutive Quarters

Kia announced on the 25th that its operating profit based on International Financial Reporting Standards (IFRS) consolidated basis for the third and fourth quarters of this year increased by 0.6% compared to the same period last year, reaching 2.8813 trillion KRW. Despite reflecting 631 billion KRW as provisions for the Lambda II engine warranty extension, growth was driven by reduced material costs and favorable exchange rate effects.

Sales rose by 3.8% to 26.5198 trillion KRW during the same period. The operating profit margin, which indicates the company's profitability, recorded a double-digit figure of 10.9%. The company explained that without one-time quality costs, the margin would have exceeded 13%. Hyundai Motor Company, which announced its earnings the previous day, reported a 6.5% decrease in operating profit for the third quarter.

Kia sold 763,639 units (wholesale basis) domestically and internationally during this period, a 1.9% decrease compared to the same period last year. Domestic sales were 125,191 units, down 6.7%, while overseas sales were 638,502 units, down 0.8%.

The decline in domestic sales was due to reduced market demand and the impact of facility construction for new car production at the Hwaseong plant. Overseas, sales increased in the North American region, India, Africa, the Middle East, and Asia-Pacific regions, but decreased in Europe, China, Russia, and Latin America.

Eco-friendly vehicles sold 155,000 units, a 3.6% increase compared to the same period last year. The proportion of eco-friendly vehicles among all models was 21.0%, up 1.5 percentage points from the same period last year.

Despite the decrease in new car sales, sales increased significantly due to strong sales in the North American region, where higher-priced models are popular. The company explained, "The effect of price increases based on product competitiveness and brand, along with a rise in the average selling price per unit, contributed to this."

Additionally, increasing the sales proportion of high-profit models, reduced material costs due to lower raw material prices, and favorable exchange rate effects helped improve profitability. The operating profit margin has maintained double digits for eight consecutive quarters since the fourth quarter of 2022.

Kia President Song Ho-sung is giving a presentation at the CEO Investor Day held last April.
[Photo by Hyundai Motor Group]

With cumulative business performance exceeding the business plan targets this year, the company announced that it has decided to additionally cancel 50% of the remaining treasury shares worth 500 billion KRW within the year as a measure to enhance shareholder value. The annual performance outlook was also revised upward. Sales revenue was raised from the previous 101.1 trillion KRW to 105-110 trillion KRW, and operating profit was increased from 12 trillion KRW to 12.8-13.2 trillion KRW. The operating profit margin was revised upward from 11.9% to over 12%.

The company expects the market environment to remain challenging. It stated, "Geopolitical crises will continue, volatility will increase due to leadership changes in major countries worldwide, and an unstable management environment will persist due to sluggish real economies."

Entering the fourth quarter, the company anticipates increased sales due to the normalization of factories, the full-scale sales of popular models such as the K8 Hybrid and Carnival Hybrid, and the launch of the improved Sportage model. It plans to increase sales centered on recreational vehicles (RVs) and hybrids while simultaneously promoting the popularization of electric vehicles.