SEOUL, April 22 (Korea Bizwire) — Kia Corp., South Korea’s second-biggest carmaker, said Thursday its first-quarter net profit nearly tripled from a year earlier on a low base effect and strong sales of sports utility vehicles (SUVs), but the company is worried about the impact of global chip shortages on production.
Net profit in the January-March period stood at 1.03 billion won (US$926,4 million), up 289.2 percent from a year earlier, the automaker said in a regulatory briefing.
Operating profit soared 142.2 percent on-year to 1.07 trillion won in the first quarter, and sales rose 13.8 percent to 16.6 trillion won over the period, the company said.
The operating profit was 9.3 percent lower than the average estimate by local brokerages, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.
Kia said recovery in demand following the COVID-19 pandemic and strong sales of high-margin SUVs in major markets propelled its sales growth, with recreational vehicles accounting for half of its sales.
Its domestic sales rose 11.4 percent on-year to 13,075 units in the first three months of this year on robust demand for major models, including Sorento SUVs, Carnival minivans and K5 midsize sedans.
The automaker sold 559,915 units in foreign markets in the first quarter, up 5.3 percent from a year earlier, and India showed the highest growth thanks to the launch of new SUV Sonet, the firm said.
In the second quarter, the automaker said it will focus on marketing for its new K8 sedan and its first all-electric EV 6 ahead of its launch in the second half of this year.
Kia expected an unfavorable business environment in the second quarter due to the global chip shortage, prolonged COVID-19 pandemic and rising raw material costs.
“The worsening global chip shortage is expected to disrupt production of some vehicles in the second quarter, but we will actively take measures to minimize its impact,” Kia said in a statement.
Kia said it will flexibly adjust the vehicle production plan, search for alternative components and preemptively secure inventory to minimize production cuts forced by the continued shortage of automotive chips.
Kia has suspended all weekend overtime work at its Hwaseong plant, south of Seoul, which produces Sorento SUV, Niro EV and K8, since March due to automotive chip shortage, and it briefly shut down its plant in the U.S. state of Georgia last month for the same reason.
“May will be the toughest period. We took advantage of the existing inventory until April, but the inventory levels have nearly hit the bottom,” Joo Woo-Jeong, head of finance & accounting division, said in a conference call.
“We are expected to have some difficulties in production in May, but we can’t accurately predict the potential supply (of automotive chips) at this point.”
Shares in Kia slipped 0.48 percent to 83,400 won on the Seoul bourse, underperforming the benchmark KOSPI’s 0.18 percent gain.