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Kia Posts Operating Profit
Kia Motors efforts to spend less on marketing and cut other costs helped the company to achieve a 36 percent rise in net profit.
Yesterday, Kia reported it’s first net profit in four quarters in the second quarter of this year, according to the nation’s second-largest automaker on Friday.
However, a stronger won currency and persistent labour unrest are expected to squeeze short-term earnings at Kia, analysts said.
Despite the positive second-quarter results, Kia posted an operating loss of 36.7 billion won (US$40 million) in the first six months of this year, as it sold fewer cars and was hit by a damaging labour strike.
“We are now trying to complete wage negotiations with union as soon as possible to help improve earnings in the second half,” Kia’s Chief Executive Officer Cho Nam-hong said in a statement.
On the same day, Kia’s 28,000-member union was voting to decide on whether to accept a tentative wage agreement to end partial strikes since early this month that cost the automaker US$370 million in lost production.
In the three months to June, Kia earned 61.4 billion won ($67 million) in net profit, compared with a profit of 45 billion won for the same period a year earlier.
At the operating level, Kia bounced back into the black with a profit of 36.9 billion won, compared with a loss of 16 billion won a year ago.
For the April to June quarter, Kia sold 289,334 vehicles, down 1.4 per cent from a year ago. Kia’s vehicle sales for the first half of this year fell 4.4 percent to 560,474 units, the company said.
“By the end of this year, Kia Motors aims to cut costs by a total of 1.8 trillion won,” Kia’s Chief Financial Officer Ahn Hee-bong told analysts in a conference call. Ahn said Kia had already cut 795.8 billion won in costs in the first half.
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It was written in one of the car magazines, by an expert fo car market and sales, that if Kia survives this and next year, it will have a bright future. They have to overcome labour problems at home, strong Korean won and slowing sales.