Strong sales at home offset weak U.S. results

Kia's fourth-quarter profits rise 29%

Strong sales at home offset weak U.S. results

Kia, which is more dependent on plants in Korea, is relatively more vulnerable to unfavorable currency exchange rates than Hyundai.

Photo credit: REUTERS
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SEOUL (Bloomberg) -- Kia Motors Corp.'s fourth-quarter profit rose 29 percent, beating analysts' estimates, after sales of pricier models increased at home.

Net income climbed to 949 billion won ($882 million), from 737.5 billion won a year earlier, the Seoul-based company said Friday in Korea.

That surpassed the 909 billion-won average of 25 analysts' estimates compiled by Bloomberg.

The higher sales of Sportage and Soul vehicles are a bright spot in a year in which a stronger won damped revenue in the United States, Kia's biggest market, and the company agreed to settle lawsuits for overstating fuel-economy ratings.

Kia and its largest shareholder Hyundai Motor Co. are predicting the weakest combined sales growth in eight years as competition intensifies and the stronger local currency hampers exports.

"Kia is relatively more vulnerable to the unfavorable exchange rates than Hyundai is, as it's more dependent on its plants in Korea," Lee Hyun Soo, an analyst at Kiwoom Securities Co., said before the earnings announcement. "Still, this year will be better than last year, with new and profitable models like the Sorento sport utility vehicle scheduled for release in the second half."

The won has advanced 3.4 percent against the U.S. dollar and 6.7 percent versus the yen in the past six months, the best performer among 11 Asian currencies tracked by Bloomberg.

2014 forecast

Kia plans to increase deliveries this year by 5 percent to 2.96 million vehicles, according to comments made by Chairman Chung Mong Koo to employees during a New Year address in Seoul this month.

Hyundai and Kia's combined deliveries will increase 4 percent to 7.86 million vehicles in 2014, Chung said Jan. 2.

That's the slowest growth since 2006 and falls short of the 8 million units projected by analysts, based on the average estimates of five analysts surveyed by Bloomberg News.

The won gained 23 percent against the yen last year, curbing Kia's and Hyundai's competitiveness against Japanese automakers such as Toyota Motor Corp. in exporting to the United States.

Kia's U.S. sales fell 3 percent in the three months ended Dec. 31, dropping for the fourth consecutive quarter, to 118,796 units, according to data on the company's website. In 2013, sales in the U.S. fell 4 percent compared with a year earlier.

Incentive payments

The company spent 13 percent more on incentive payments such as marketing promotions in 2013, compared with a 0.6 percent increase at Toyota and the market average of a 3.8 percent gain, according to Autodata Corp.

Deliveries of the company's pricier models at home including the Sportage SUV and the Soul wagon jumped 58 percent and 84 percent last quarter, respectively, according to data on the company's Web site.

Sales of the Soul wagon rose 13 percent in China. That helped Kia offset losses from increased competition in the United States as a weaker yen makes Japanese cars cheaper overseas.

Hyundai and Kia will spend as much as $395 million to settle lawsuits by customers claiming they overstated the fuel-economy ratings of some car models, the automakers said in December.

The companies had apologized in November 2012 for misstating the fuel economy and issued debit cards to buyers of about 900,000 cars and light trucks sold in the U.S. as reimbursement for higher-than-expected fuel costs.

Kia and Hyundai blamed procedural errors at a joint testing facility in South Korea for the inaccurate ratings.

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