Kia posts record-high double-digit profit margin in second quarter

Kia Corp., South Korea’s largest automaker, said on Friday it posted its first-ever double-digit operating profit margin in the second quarter, buoyed by higher selling prices, decreased dealer incentives and favorable dollar-won exchange rates.

The automaking unit of Hyundai Motor Group said its second-quarter operating profit rose 50.2% to 2.23 trillion won ($1.7 billion) on a consolidated basis from 1.48 trillion won in the year-earlier period.

Its operating profit margin in the April-June period was 10.2% compared with 8.1% a year earlier. The latest figure marks the company’s highest profit margin since it introduced the global IFRS accounting standards in 2010.

Sales increased 19.3% on year to 21.88 trillion won from 18.34 trillion won.

Net profit rose 8.6% to a record quarterly high of 1.88 trillion won from 1.34 trillion won.

The company said increased sales of high-end SUV models and recreational vehicles, decreased incentives and the won's weakness against the dollar helped offset the carmaker's production losses derived from a prolonged chip shortage and disruptions of parts supplies.

Reflecting fiercer competition with rivals, the company’s global sales volume declined 2.7% on year to 734,000 vehicles in the second quarter.

However, its average sales price increased 19.1% in the second quarter from a year ago, while incentives declined by as much as 527 billion won.

The Korean currency’s 12.3% fall versus the dollar in the second quarter from the year-earlier period also helped Kia’s profits, boosting the value of their earnings gained abroad.

Kia’s global market share ex-China steadily rose to 5.1% at the end of March from 4.9% at the end of 2021, 4.6% in 2020 and 3.9% in 2019.

EV SALES INCREASE

The company said increased sales of electric vehicles helped boost its quarterly sales volume.

In the second quarter, Kia recorded retail sales of 133,000 electrified vehicles, accounting for 17.7% of overall sales – up 8.7 percentage points from a year earlier.

Of its entire electrified vehicle sales, battery-powered cars, or BEVs, accounted for 44,000 units, a 98% increase year-on-year.

During an earnings call with analysts, Kia executives said they expect higher raw material prices to hit its third-quarter earnings hard and the negative impact will start decreasing from the fourth quarter.

As Kia shifts its focus from internal combustion vehicles to electric cars, it has pledged to launch seven new electric models by 2027 to gain a greater share of the global EV market.

Kia’s strong second-quarter performance comes a day after its sister firm Hyundai Motor Co. posted its highest-ever quarterly sales and operating profit, driven by pricey SUVs and premium Genesis models as well as favorable foreign-exchange rates.

Write to Hyung-Kyu Kim at khk@hankyung.com
In-Soo Nam edited this article.