Kia's 2020 net profit drops 17.7% as revenue hits record high

[NEWS1]

Kia’s net profit dropped 17.7 percent in 2020, hit by slow demand for cars amid the Covid-19 pandemic, provisioning costs related to the problematic Theta 2 engine and a walkout by its labor union in the latter half of the year.

Its annual revenue hit an all-time high thanks to strong sales of sports-utility vehicles (SUVs), which tend to be more expensive than sedans.

Korea’s second-biggest carmaker by sales reported 1.5 trillion won ($1.4 billion) in net profit for 2020 on Wednesday, down 1.8 trillion won compared to 2019.

Its revenue came to 59.1 trillion won, a record high, up 1.8 percent from 58.1 trillion won in 2019.

Kia had to provision 1.26 trillion won in the third quarter last year for costs related to the recall of its Theta 2 gasoline direct injection engines.

It also produced approximately 47,000 fewer cars than expected due to disruption caused by unionized workers staging a series of partial walkouts over wage negotiations.

Kia sold 2.6 million cars last year, 7.6 percent fewer than the 2.8 million it sold in 2019.

Its sales experienced a 6.2 percent on-year jump in Korea and 210.7 percent jump in India after first launching in the market in 2019.

Sales in North America slipped by 8.8 percent in 2020, and by 17 percent in Europe.

Kia’s performance in the fourth quarter was one of its strongest yet.

Its net profit came to 976.8 billion won for the fourth quarter, a whopping 182 percent up from the previous year’s 346.4 billion won. Revenue was 16.9 trillion won during the Oct.-Dec. period, up 5 percent from the same period last year.

Its operating profit came to 1.3 trillion won, a record-breaking figure for the carmaker's quarterly performance. It was an on-year jump by 117 percent and exceeded the market consensus by 29 percent. The market consensus for fourth-quarter revenue was 16.8 trillion won.

“Production disruption due to a partial walkout and slow demand due to Covid-19 made a challenging condition for business, but with sales expansion of more profitable SUV models, we could improve our earnings,” the company said in a statement.

Sales of SUVs in the fourth quarter accounted for 58.7 percent, up from 52.5 percent the year before.

This year, Kia hopes to sell 2.92 million units globally, up 12.1 percent from what was sold last year.

The highly anticipated EV model, known only by its codename CV, will have its world premiere in March and start sales in Korea and Europe in July. It will hit the United States in December.

Its year-end dividend shrank from 1,150 won per share in 2019 to 1,000 won per share in 2020.

Kia shares rose 0.33 percent on Wednesday to close at 90,000 won per share.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]