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Kia Reports Big Bump In Earnings

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Kia Reports Big Bump In Earnings

Hyundai’s “weak” sibling defies critics.

by Paul A. Eisenstein on Nov.01, 2010

The launch of the new Optima is expected to drive a strong performance for Kia during the fourth quarter and beyond.

Defying critics, the once-bankrupt Kia has posted a 66% increase in earnings for the third quarter, and with strong global demand and some critical new product in the pipeline the Korean carmaker is looking at further gains in the final three months of the year, according to forecasts.

Net income for the quarter ending September 30 soared to 666.6 billion won, or $593 million, compared with 402 billion during the third quarter of 2009, the maker reports. Significantly, that was more than 30% better than the 504 billion won forecast by a consensus of industry analysts compiled by the Bloomberg news service.

Revenues rose by 26%, to 5.69 trillion won reflecting a 24% global increase in unit sales. Notably, in the Korean home market, Kia volumes were up 25%, even as the maker’s “stronger” parent brand, Hyundai, reported a decline of 12%.

The latest and projected numbers underscore the dramatic turnaround underway at Kia, which was taken under the Hyundai wing when it nearly collapsed in 1999, during the Asian economic meltdown.

It has been long debated how the smaller maker would fare under Hyundai’s domination, and there has been little doubt that significant changes have been demanded of Kia, including some major shifts in product strategy.

At one time, Kia tended to focus on low-end products based on unique rear-wheel-drive platforms. Today, however, it is largely sharing front-drive “architectures” developed for its Korean sibling. The new 2011 Kia Optima, for example, relies on the same underpinnings and powertrains as the well-reviewed Hyundai Sonata – though the maker have been pushing to create more visual distinctiveness between otherwise similar models, and the redesigned Optima has been praised for a more sporty shape than the more mainstream Sonata.

Skeptics continue to raise doubts about Kia’s long-term viability, most notably and recently with a widely-circulated report that initially ran, earlier this year, on 247WallStreet.com and which suggested the Korean maker was one of the big brands most likely to fail, along with the likes of now-bankrupt Blockbuster.

The maker’s recent performance, both in the market and on the stock exchange suggests the critics are off-base, Bloomberg quoting analyst Lee Myung Hoon, of E*Trade forecasting “likely…record quarterly earnings in the fourth quarter.”

While Kia is targeting growth in a number of key markets, including North America, where it saw an 8% increase during the third quarter, it is scoring especially well in China. Demand in the booming market surged 18% compared to year-earlier figures, helping Kia’s global sales jump to 541,884 for the quarter, compared with 438,467 for the prior third-quarter period.

With analysts forecasting gains in the stock, Korea’s second-largest maker scored a 10% increase in its share price, Monday, reaching its highest level in 12 years.

link:

http://www.thedetroitbureau.com/2010/11/kia-reports-big-bump-in-earnings/

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