Kia's second-quarter profit dips on higher marketing outlays
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SEOUL (Bloomberg) -- Kia Motors Corp., South Korea's second largest carmaker, reported second-quarter profit that missed analysts' estimates after the company increased marketing costs for new vehicles.
Net income fell 2.8 percent to 1.1 trillion won ($960 million), compared with a revised 1.13 trillion won a year earlier, the company said in a statement.
Profit missed the 1.21 trillion won average of 24 analyst estimates compiled by Bloomberg. Revenue increased 8.4 percent to 12.55 trillion won.
CFO Park Han Woo said marketing costs increased as the company promoted new models.
The cost of promoting the new Pride subcompact in overseas markets and the high-end K9 in South Korea undermined helped offset increased earnings and market share gains in Europe.
Operating profit, or sales minus the costs of goods sold and administrative expenses, rose 18 percent to 1.22 trillion won.
That compares with the 1.27 trillion won average analyst estimate. Hyundai, Kia's biggest shareholder and the country's largest automaker, reported a 10 percent increase in second-quarter profit.
The automaker's earnings announcement comes amid strikes held by the company's union seeking increased pay and improved working conditions. Kia's workers together with Hyundai's union have staged two partial strikes this month.
Labor strikes
The company estimates a production loss of 5,450 units amounting to 94 billion won from the partial strikes held on July 13 and July 20.
Hyundai estimates a loss of 8,630 units, or 175 billion won, for strikes on its plants also held on the same days.
In China, Kia's deliveries increased 26 percent, led by sales of Pride subcompacts that rose almost five-fold.
Plants in China sold 18 percent more cars, according to data on the company's website.
Demand in China may slow as major cities of the world's largest automobile industry impose a quota on new vehicle registrations to control vehicle emissions and ease traffic congestion.
Kia sales jumped 25 percent in Europe, fueled by sales of the Pride and Sportage sport-utility vehicle. By comparison, industry sales in the region shrank 3.2 percent.
Europe gains
The automaker gained the most market share in Europe among major automakers, increasing it to 2.7 percent of the total market compared with 2.1 percent a year earlier, according to data compiled by Bloomberg.
Kia's plant in Slovakia that caters primarily to European demand sold 17 percent more units compared to 2011.
Domestic sales rose by 0.2 percent despite a 3.3 percent decline industrywide as uncertainty from Europe's economic crisis and rising household debt undermined consumption, according to an e-mailed statement from the Korean Automobile Manufacturers Association.
In the U.S., the company's plant in Georgia sold 39 percent more cars last quarter. Including vehicles imported from other plants, deliveries rose 7.4 percent, according to the company's website.
That compares with the industry's 16 percent gain, as demand for Kia's Soul wagons fell and Japanese companies including Toyota Motor Corp. regained market share as they restored production disrupted by the March 2011 tsunami and earthquake.
Kia's sales slumped 16 percent in Latin America, while the industry saw a decline of 3.5 percent, according to data compiled by Bloomberg. Sales fell 11 percent in the Asia-Pacific region which excludes South Korea and China, according to company data on its website.
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