Bloomberg News

Kia Profit Misses Analyst Estimates on Marketing, Strike Costs

July 26, 2012

Kia Motors Corp. (000270), South Korea’s second largest carmaker, reported second-quarter profit that missed analysts’ estimates on increased marketing costs for new vehicles and provisions for looming strikes.

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 Seoul-based company said in a statement today. 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.

The company probably increased its spending on sales and marketing for a new luxury sedan while also putting more money aside for potential production losses and the costs of labor strikes, according to three analysts surveyed by Bloomberg. The rise in expenses curbed the benefit of increased sales and market share gain in Europe.

“The company would have booked provisions ahead of launching the K9 sedan and rising labor issues,” said Yim Eun Young, an analyst at Dongbu Securities Co. (016610) in Seoul before the earnings announcement. “Conservative accounting, that’s all Kia’s got against it.”

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, yesterday reported a 10 percent increase in second-quarter profit.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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