Kia eyes rosier 2024 after record-high Q3; Hyundai Mobis’ OP up 32%

Kia Corp., South Korea’s No. 2 carmaker after Hyundai Motor Co., presented a brighter outlook for this year after posting record-high operating profit and sales for a third quarter on Thursday, raising expectations that the Korean auto siblings would overtake the world’s No. 2 car seller Volkswagen this year.  

On Thursday, Kia projected its operating profit for 2024 to reach up to 13.2 trillion won ($9.6 billion), 10% higher than its earlier target of 12 trillion won. Its sales guidance for this year is also revised upward to up to 110 trillion won versus its target of 101.1 trillion won presented earlier this year.

As a result, its operating profit margin is expected to top 12% this year, a notch above its earlier goal of 11.9%, the company said. 

Compared with five years ago, its operating profit would leap six-fold this year with doubled sales.

Kia said it will strive to boost profitability with improved car quality and brand awareness to offset the electric vehicle market slump, cranking up competition fueled by an oversupply of cheap Chinese EVs and global finished carmakers’ austerity measures.

Kia’s rosier outlook for this year’s earnings comes after it announced solid earnings for the third quarter on the same day.

It logged 2.88 trillion won in operating profit on a consolidated basis for the July-September period, the company said in a regulatory filing. That was a mere 0.6% up from the same period last year but marked the company’s historic-high profit for the quarter.

Its consolidated sales stood at 26.52 trillion won, adding 3.8% from a year ago and recording the largest-ever sales for the quarter.

Its profit margin reached 10.9%, recording a double-digit margin for eight consecutive quarters. This was higher than its bigger sibling Hyundai Motor’s 8.3% and General Motors Co.’s 8.4%. It was even higher than Tesla Inc.’s 10.8%.

MOVE TOWARD GLOBAL NO. 2

Kia owed its firm third-quarter profit largely to a rise in sales of high profit-generating cars with high price tags, a fall in materials costs driven by lower commodities prices and favorable exchange rates given the weaker Korean currency against the greenback.

“We have won consumers’ confidence in our cars after we have succeeded in improving technologies and achieving cost innovation, which has resulted in better brand awareness,” said Joo Woo-jeong, Kia’s executive vice president and chief financial officer.

Kia has the upper hand against its peers thanks to its ability to produce different car models on one assembly line, helping it offset the ongoing EV chasm, added Joo.

Combined sales of the Korean auto duo under Hyundai Motor Group are expected to top 280 trillion won in 2024, higher than last year’s record high of 262 trillion won, which made them the world’s No. 3 carmaker for the first time.

Their combined operating profit is projected to exceed 30 trillion won.

The forecast raised expectations that the Korean sibling carmakers together would beat their bigger rival Volkswagen, which is grappling with falling productivity and declining car sales in China, to become the global No. 2 auto group.

Volkswagen reported 10.1 billion euros ($10.9 billion) in operating profit for the first half of this year, down 11% from the same period last year.

Rallying alongside the strong earnings and rosy outlook, Kia shares closed up 2% at 92,700 won on Friday.

The stock’s solid performance was also driven by the company’s announcement the same day that it would cancel half of its treasury shares within this year.

The company bought back 500 billion won worth of treasury shares in the first half as part of a series of shareholder-friendly measures and already retired the remaining half, or 2,187,785 shares, in May.

In January, Kia pledged to retire the remaining 50% of the repurchased treasury shares by year's end if it achieved its 2024 sales and profit targets.

AUTO PARTS-MAKING SISTER ALSO HAD A GOOD QUARTER  

The Korean auto duo’s strong performance contributed to a record profit for their auto parts-making sister Hyundai Mobis Co. in the third quarter.

On Thursday, the world’s fifth-largest auto parts maker reported 908.6 billion won in operating profit for the July-September period, breaking the 900 billion won threshold for the quarter for the first time.

It marked a 31.6% gain from the same period of last year.

Its sales, however, shed 1.6% to 14 trillion won.

The company attributed the sharp profit gain to strong sales of its high value-added core automotive electronics. It also succeeded in cutting raw materials costs.

Hyundai Mobis won $2.38 billion worth of overseas orders in the first three quarters of this year, the company said, adding that it will strive to achieve this year’s target.

Hyundai Mobis shares rose 2.6% to end at 256,500 won on Thursday.

Write to Jung-Eun Shin at newyearis@hankyung.com
Sookyung Seo edited this article.