Kia reported its operating profit down 51% as the won’s gains affected the value of exports.
The automaker announced that 2013 will be a ‘difficult year’ and it expects the stock to reach its lowest level in more than two years. The Seoul- based company said that its fourth-quarter operating profit fell to 404.2 billion won ($377 million) from 826.9 billion in 2012. This means 35% less than the analysts’ average estimate of 621.4 billion won. Net income also dropped 6.7% to 737.5 million won.
“The results were far worse than I had expected, ” Lee Sang Hyun, an analyst at NH Investment & Securities Co. said by phone. “I don’t think we can expect profitability to improve anytime soon.”
During last year’s last quarter the won increased 4.4% against the dollar, and Hyundai and Kia expect it to strengthen more this year, affecting exports. For Kia and Hyundai exports account for 75% to 80% of their total sales, therefore each 10-won gain against the dollar lowers Kia’s profit by almost 80 billion won. Analysts expect the won to gain over 3% to 1,030 per dollar and it will probably end this year at 90 per dollar, the weakest finish a year since 2009.