Kia's Operating Profit Last Year Up 145.1% YoY... "This Year's Target 3.15 Million Units" (Comprehensive)

[Asia Economy Reporter Hyunseok Yoo] Kia's sales revenue increased in the fourth quarter of last year, but operating profit decreased. However, the full-year performance showed that despite a decline in total sales volume due to a shortage of automotive semiconductors, sales revenue and profit increased thanks to higher sales of premium vehicles and favorable exchange rate effects.

On the 26th, Kia announced that its sales revenue for the fourth quarter of last year was KRW 17.1884 trillion, with an operating profit of KRW 1.1751 trillion. Compared to the previous year, sales revenue rose by 1.6%, but operating profit fell by 8.3%. The number of units sold in the fourth quarter was 647,949, down 12.8% from the previous year.

A Kia official commented on the fourth-quarter results, stating, “The global semiconductor shortage caused an overall supply shortage of vehicles, leading to reduced sales,” but added, “We minimized the decline in profitability through an increase in average selling price and mix improvement by focusing on high-margin models such as RVs.”

Regarding operating profit, favorable factors included strong sales of new models such as the EV6 and Sportage, improved product competitiveness, enhanced brand awareness, record-high average selling price increases, and significant reductions in incentives. However, these gains were offset by decreased sales volume and increased costs such as expanded R&D expenses and performance bonuses.

Kia's annual sales last year recorded 535,016 units domestically, a 3.1% decrease from the previous year. Overseas sales increased by 9.1% to 2,241,343 units, resulting in a global market total of 2,776,359 units, up 6.5% year-on-year.

Annual sales revenue grew by 18.1% year-on-year to KRW 69.8624 trillion, driven by expanded sales of high-margin RVs and new models, mix improvement, and increased sales of eco-friendly vehicles.

Annual operating profit reached KRW 5.0657 trillion, a 145.1% increase from the previous year, benefiting from a base effect due to quality costs incurred in 2020, expanded sales volume and mix improvement, increased average selling price per unit, and reduced incentives, resulting in a virtuous cycle of overall profitability improvement. The operating profit margin was 7.3%.

Regarding this year's business environment, Kia expects global automobile demand to recover as the impact of COVID-19 eases, despite concerns over reduced consumer purchasing power due to inflation and intensified competition among major companies. The eco-friendly vehicle market, especially electric vehicles, is expected to expand significantly.

Accordingly, Kia plans to achieve a significant increase in sales by rapidly resolving the backlog of undelivered vehicles through production expansion linked to improved semiconductor supply conditions, while continuing to strengthen profitability based on enhanced brand and product competitiveness. Additionally, Kia will focus on expanding sales of eco-friendly vehicles such as the EV6 and the new Niro, concentrating on the transition to electric vehicles.

In the mid to long term, Kia aims to secure profitability by expanding production and sales of electrified models and to concretize new revenue and business areas such as software and services.

Kia has set its sales target for this year at 3.15 million units (including CKD), a 13.5% increase from last year's performance. Domestic sales are expected to increase by 5.0% to 562,000 units, and overseas sales by 15.5% to 2,588,000 units.

The sales revenue and operating profit targets for this year are KRW 83.1 trillion and KRW 6.5 trillion, respectively, representing increases of 19.0% and 27.3% year-on-year. The operating profit margin is expected to improve by 0.5 percentage points to 7.8%.

Meanwhile, Kia plans to continue enhancing shareholder value by considering a tripling of the year-end dividend for 2021 to KRW 3,000 per share (dividend payout ratio of 25.3%) from KRW 1,000 per share in 2020. The final decision will be made at the shareholders' meeting scheduled for March.

This content was produced with the assistance of AI translation services.