Kia misses estimate for its Q4 2015 profits

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Kia misses estimate for its Q4 2015 profits

Kia Motors, the country’s No. 2 carmaker, said Wednesday that its fourth-quarter operating profit rose by 2.8 percent to 514.4 billion won ($427.7 million) compared to the same period last year, missing a market forecast of 600 billion won.

Despite the improvement in sales in the domestic market, unfavorable currency conditions in Europe and Russia ate into Kia’s profit margins.

The profit in the last three months of 2015 was down 24.1 percent from the third quarter, when earnings surged 19.6 percent on-year to 678 billion won over a year earlier.

Net income for the fourth quarter, which excludes non-recurring items, dropped 1.2 percent from a year earlier to 430.8 billion won while revenue jumped 9.3 percent to 12.8 trillion won.

“It is true that the fourth quarter couldn’t meet market expectations,” said vice president Han Cheon-soo in an earnings conference call Wednesday. “The combination of falling exchange rate and surging marketing fees to clear inventories all contributed to that,” he said.

For the full year, Kia posted record sales of 49.5 trillion won, up 5.1 percent from a year earlier, though its annual operating profit dropped by 8.5 percent to 2.35 trillion won.

A total of 1.72 million cars were sold domestically, up 1.1 percent from 2014, and 1.32 million units overseas, down 0.7 percent.

Strong sales of new models such as the K5 and Sportage were cited as major factors boosting sales, according to the company.

The carmaker set a sales target for this year of 3.12 million units both at home and abroad, expecting market conditions to improve.

“We’ve seen rising sales in relatively new markets in Latin America, the Middle East and Africa,” Han continued. “The demand there will boost overall sales in 2016.”

The carmaker also expects a new plant in Mexico to help it gain a stronger footing in the Latin America region.

The new plant, due to open in May, will have a production capacity of 300,000 units per year, raising Kia Motors’ total production capacity to 3.37 million units - 1.69 million cars in Korea and 1.68 million units overseas.

The company said it is necessary to increase its ratio of overseas production, currently at 44 percent, since a rising share of sales come from overseas region.

Han also expressed high expectations for the company’s first hybrid SUV, the Niro. He said that the plug-in hybrid model will start selling in the first half of this year, adding that its sales target stood at 65,000 units in the global market.


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