Kia Corp. Reports 21% Decline in Q4 Net Profit on Rising Costs and Stronger Won

Kia Corp., South Korea's second-largest carmaker by sales, announced a 21% drop in net profit for the fourth quarter compared to the previous year. The decline was attributed to higher costs and the strengthening won.

Yonhap News Agency reported that the company's net profit for the three months ending December reached 1.62 trillion won (US$1.2 billion), down from 2.04 trillion won during the same period in 2022.

Impact of Cost Factors

According to a company statement, increased incentives, unfavorable exchange rates due to the stronger won against the dollar, and higher labor costs contributed to the decrease in quarterly results. These factors had a considerable impact on the financial performance of the company during this period.

The average exchange rate for the dollar in the fourth quarter decreased to 1,289.40 won, compared to 1,344.80 won in the previous quarter. A stronger won translates to a lower value for an exporter's dollar-denominated earnings when converted into the local currency, affecting overall earnings.

Operating profit also experienced a decline, falling by 6% to 2.47 trillion won in the December quarter, compared to 2.62 trillion won during the same period the previous year. However, sales showed a positive trend, increasing by 5% to 24.33 trillion won, up from 23.16 trillion won.

Robust Sales of High-End SUVs Drive Full-Year Net Income

For the entire year of 2023, Kia witnessed a remarkable 62% surge in net income, reaching 8.78 trillion won compared to 5.41 trillion won in the previous year. The impressive growth in earnings was primarily driven by robust sales of high-end SUVs, as per Korea Times.

Operating profit also soared by 61% to 11.61 trillion won in 2023 from 7.23 trillion won in the previous year. Additionally, the company reported a 15% increase in sales, reaching 99.81 trillion won compared to 86.56 trillion won.

Kia has set ambitious targets for 2024, aiming for full-year sales of 101.1 trillion won and operating profit of 12 trillion won. The company is poised for future growth and is determined to achieve these objectives.

To enhance shareholder value, Kia plans to repurchase 500 billion won worth of its treasury stocks and subsequently cancel half of them in the first half of the year. If the targeted earnings figures for the January-September period are achieved, the remaining stocks will be canceled during the fourth quarter. However, specific target numbers were not provided by the company.

Following the announcement of the stock cancellation plan, Kia's stock price surged by 2.5% to 90,100 won as of 11 a.m. This significant increase far outperformed the broader KOSPI market, which experienced a 0.6% loss.

Photo: Kia Newsroom