Kia's operating profit down 8.5 % last year

Kia's operating profit down 8.5 % last year

Kia Motors reported better sales result last year but they didn’t lead to operating profit gains, according to a regulatory filing Wednesday.

The nation’s No.2 carmaker posted 49.52 trillion won in sales in 2015, up 5.1 percent year-on-year. It sold 3.05 million cars worldwide in 2015, up 0.3 percent from the previous year.

Yet, its January-December operating profit plummeted to a record low over the past five years of 2.35 trillion won, down 8.5 percent.

Despite brisk domestic sales, riding on the popularity of recreational vehicles and launches of new models including the new K5 and Sportage here, Kia’s full-year operating profit worsened in the wake of a sales slump in emerging markets as well as intensifying competition with global automakers, which pushed up its promotion spending.

The operating profit has been on a downward trend since 2012’s 7.5 percent. It fell to 6.7 percent in 2013, 5.5 percent in 2014 and 4.8 percent last year.

The company predicted that domestic and international market conditions will change greatly this year. “Market growth in advanced countries will become slow. Due to weak oil and falling raw material prices, we expect the slow growth trend may be prolonged, triggering even more competition,” said a company official during a conference call.

Its fourth-quarter operating profit grew 2.8 percent year-on-year to 514.4 billion won over the period, but hit below the market consensus of 648 billion won.

Local analysts said its performance was below what was expected.

“Its fourth quarter performance was below the market consensus. The low demand and weak currencies in markets like Russia and Brazil worked adversely on Kia’s bottom line last year,” said Song Sun-jae, an analyst at Hana Financial Investment. “The increased stock backlog played another role.”

In a bid to tide over the challenges, the carmaker said that it will focus on global markets with enhanced brand recognition and competitive new vehicle models in major segments.

In May, Kia’s Mexico plant will begin operation.

“With the new car launches and Mexico plant, we will focus more on quality than quantity. When our Mexico plant begins production, we expect to maintain a stable market share in North and Latin America,” said Han Chun-soo, Kia’s chief financial officer.

Kia expects to sell 3.12 million cars this year, a 2.3 percent rise from last year.

In a separate filing, Kia said it will spend 441 billion won to pay 1,100 won per share in dividends.


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