Kia Motors Profit Jumps 61%

SEOUL — South Korea's Kia Motors Corp. Friday trounced estimates to post a 61 percent jump in second-quarter net profit, increased its forecast for global sales to over two million units for the year and announced it will launch new vehicles to spur demand, reported The Wall Street Journal.

Brisk sales of new models helped net profit rise to 557.8 billion won ($472 million) in the three months ended June 30, up from 347.1 billion won a year earlier. Net profit for the first six months of the year more than doubled to 956.3 billion won from 444.5 billion won during the same period a year earlier, the company said in a statement.

Kia's net profit was expected to rise 36% from a year earlier to 472.7 billion won, according to the consensus forecast by analysts according to Seoul-based market research firm FnGuide.

The better-than-expected results sent Kia shares 2.3 percent higher to close at 30,900 won Friday, as investors overlooked the impact of a possible labor strike on the carmaker's third-quarter earnings.

Kia, which together with Hyundai Motor Co. forms the world's fifth-largest car maker by sales, had earlier set a target of 1.94 million units in global sales for 2010. It achieved 52 percent of its target by selling 1,004,000 units in the first half, leading to a revision of the target.

The company said it plans to strengthen its overseas marketing and sales with new products. "Kia will launch the K5 midsize sedan and the Sportage R sport utility vehicle in overseas markets late this year in order to excel the sales target," the statement said.

Second-quarter operating profit climbed 28 percent from a year earlier to 423.7 billion won from 330.3 billion won, while sales were up 23 percent to 5.768 trillion won from 4.676 trillion won. First-half operating profit jumped 75% to 733.5 billion won and sales rose 30 percent to 10.629 trillion won.

However, analysts struck a cautious note, saying third-quarter operating profit may be similar to the year-earlier level of 330 billion won due to a possible strike during this year's wage talks. Fewer working days due to summer holidays, which usually stretch from July through August, and the Korean Thanksgiving holidays in September will also likely damp profitability.

Last month, Kia's union members voted for a possible strike if the company doesn't accept their demands during the wage talks, in which they also want to discuss the issue of cutting the number of paid union executives. However, the company wants the issue of paid union executives to "be discussed separately from the wage deal."

A union spokesman had told Dow Jones the union will decide on whether to go on strike or not, depending on the company's attitude toward the "thorny" issue early next month, when they come back from summer holidays. Under revised labor laws, companies that have paid union executives are allowed to cut the number of those executives if they aren't involved in manufacturing jobs.

"Still, improved utilization rates and addition of new cars to major markets will offer a strong catalyst to Kia in the fourth quarter," Song Sang-hoon at Kyobo Securities said, forecasting a full-year operating profit of 1.409 trillion won and sales of 21.268 trillion won for this year.