Kia expands dividend 44%

2014 operating profit down 19% to 2.57 trillion won

By Park Jin-hai

Kia Motors said Friday its operating profit fell 19 percent year-on-year to 2.57 trillion won in 2014, as a stronger won against the dollar eroded its profits.

Net profit dropped 21.6 percent in 2014, hit by unfavorable foreign exchange rates and adverse business conditions in global markets. Its sales edged down 1.1 percent to 47.1 trillion won.

It said it will pay 1,000 won in year-end dividend, up 44 percent from a year earlier.

“During the fourth quarter, despite the global sales volume increase, the weak Russian currency and increased sales incentives we offered in the North American market, have led to a drop in our profitability,” said Han Chun-soo, executive vice president of the company’s finance and accounting division, during a conference call.

“Since the ruble lost 35 percent in value and the Sorento model has aged in the U.S. market, it was inevitable to increase the sales incentive in the last quarter of 2014. It was a protective measure to defend our market share,” he added.

Kia Motors said it sold 3,041,048 vehicles at home and abroad, up 7.6 percent or 213,956, from a year earlier.

The automaker said that brisk demand for the K3, K5 and K7, along with the Sportage R and the Morning, led to the relatively strong global sales last year, adding that the sales figure has exceeded the 3 million mark for the first time.

However, net income came in at 2.99 trillion won last year, compared with 3.92 trillion won reported a year earlier.

"We believe that we could defend our overseas profitability to some extent thanks to effective marketing spending and by not cutting prices much based on strong overseas sales," he added.

“After the Mexican plant and our third plant in China start operation they will increase our production by 300,000 and 150,000, respectively. That will lead to a sustainable growth after 2015.”

On the same day, Hyundai Mobis, Hyundai Motor’s parts making affiliate, reported its 2014 operating profit at 3.7 trillion won, up 5 percent from a year earlier.

Its sales also jumped 5.8 percent to 36.18 trillion won.

Since the global financial crisis of 2007, the company has been posting stable growth over the last seven years.

“In China and Europe, the sales of premium SUVs have increased, which has helped our bottom line. And to some extent, our profit model has been improved, trimming the deficit in the financial sector,” a company official said.

The company’s 2014 sales of modules and core parts increased 6.8 percent to 28.86 trillion won from the previous year.