Kia follows up Hyundai with its own low profits

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Kia follows up Hyundai with its own low profits

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A day after the nation’s leading automaker, Hyundai Motor, reported its worst operating profit in four years, sister company Kia Motors on Friday said its operating profit sank under 3 trillion won in 2014 for the first time in four years.

At the company’s headquarters in Yangjae-dong, southern Seoul, Kia said it made 2.57 trillion won ($2.5 billion) in operating profit last year, a 29 percent drop from 2013, adding that it had revenue of 47.97 trillion won on sales of slightly more than 3.04 million cars. It was Kia’s first operating profit of less than 3 trillion won since it made 2.49 trillion won in 2010. Net profit also declined 21.6 percent year-on-year in 2014, from 3.81 trillion won to 2.99 trillion won.

Kia sold more than three million vehicles last year for the first time, but its bottom line was hurt by the strong Korean won and crashing currency values in Russia, Brazil and elsewhere. During 2014, the company said the average exchange rate went from 1,095 won to 1,054 won to the dollar and the average value of the Russian ruble dropped 41 percent.

In the fourth quarter, Kia sold 782,092 cars for 500.6 billion won in operating profit, a year-on-year decrease of 23 percent.

“Car sales increased 7.6 percent from the previous year, but since the company relies heavily on exports, profitability declined due to the strong won and weak ruble,” said Han Chun-soo, Kia’s executive vice president of finance and accounting. “But the company was able to minimize the damage as it efficiently managed marketing costs, and overall sales in the global market were good.”

Following Thursday’s announcement by Hyundai Motor that it would raise its dividends per share to shore up its share price, Kia Motors said it will raise its dividends by 44 percent to 1,000 won per share.

“The company has been buying about 1 percent of its own shares since last year to improve its share value,” said Han. “We will raise the dividend payout ratio by 13.5 percent.”

The company said this will be another tough year due to intense competition, particularly from Japanese automakers that have aggressively been expanding their market share with the aid of the weak yen, but Kia projects it will sell 3.15 million cars in 2015.

“The company will strengthen its marketing of popular big vehicles such as the Carnival van and Sorento SUV,” Kia said in a statement. “In order to meet growing demand for SUVs, for instance, we will introduce the small KX3 SUV in China.”

Hyundai Mobis, another Hyundai Motor affiliate, had a much better day Friday, reporting record revenues and operating profit. The auto parts maker has enjoyed revenue and operating profit records since 2008.

The company said operating profit was 3.07 trillion won and revenue was 36.18 trillion won last year. Operating profit jumped 5 percent and revenue 5.8 percent from 2013.

Looking at the fourth quarter, the company had 880.6 billion won in operating profit, a 7 percent rise from a year ago, on revenue of 9.84 trillion won, a 1.1 percent increase. Hyundai Mobis, however, said net profit for the year slipped 0.1 percent from 2013.

The company cited strong sales by Hyundai Motor and Kia, particularly in China and Europe with the Genesis and Sonata sedans and the Santa Fe and Sorento SUVs.

By business sector, the Hyundai Mobis’s core businesses, including manufacturing modules for cockpits and other applications, accounted for 28.8 trillion won in revenue, a 6.8 percent jump from the previous year.

On Thursday, Hyundai Motor reported its lowest annual operating profit in four years of 7.55 trillion won, a 9.2 percent decrease from 8.31 trillion won in 2013, despite a 4.8 percent increase in global sales from 4.7 million to 4.96 million.

BY KWON SANG-SOO [sakwon80@joongang.co.kr ]

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