Kia posts 2.8% drop in second-quarter net income to KRW1.1 trillion

Article by Anita Panait, on July 28, 2012

Kia Motors Corp. logged a 2.8-percent drop in net income for the second quarter of 2012 to KRW1.1 trillion ($965 million) from a revised KRW1.13 trillion for the same period in 2011. The South Korean company’s second-quarter profit missed the KRW1.21 trillion net income average estimate of 24 analysts surveyed by Bloomberg.

The company also posted an 18-percent increase in operating profit to KRW1.22 trillion won, missing the KRW1.27 trillion average analyst estimate. The company logged an 8.4-percent increase in revenues to 12.55 trillion in the second quarter of 2012. The company attributed the decline in net income to increased marketing costs for new vehicles.

Kia increased its marketing spending to promote the Rio subcompact in overseas markets to cater to the growing demand for fuel-efficient models and to boost the marketing of its luxury K9 sedan in South Korea. This higher marketing cost limited the benefit of increased earnings and market share gains in Europe, where the company posted a 25-percent hike in sales, thanks to higher sales of the Rio and its Sportage SUV.

The company’s feat in Europe is in sharp contrast to the dismal industry sales in the continent that dropped 3.2 percent. The company’s strong performance in Europe allowed it to increase its market share in the region to 2.7 percent in the second quarter of 2012 from just 2.1 percent in the same period in 2011, according to data compiled by Bloomberg. Lee Jin Woo, a senior fund manager at KTB Asset Management Co., said that although Kia’s second-quarter results are “a bit disappointing,“ he expects the company to maintain good performance.

Topics: kia, income

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