Kia maintains sales target but falls short on profitability, says Middle East conflict impact will last through year-end

Kia Motors forecast that profitability is expected to fall below the level initially projected though it will meet its annual sales target. This reflects increased burdens on raw materials and logistics costs as the Middle East war drags on.

Kim Seung-jun, vice president of Kia, said during the third-quarter earnings conference call on Friday, "As sales growth has continued through the third quarter, we plan to maintain our target sales volume. However, we expect profitability to fall short of the figures we previously communicated."

Kim pointed out that he had not anticipated the prolonged Middle East war. He said, "At the time of our first-half earnings release, we did not judge that the war in the Africa and Middle East region would continue, but that prediction proved incorrect." He added, "This impact will continue at least through the end of this year."

The aftermath of the war spread across overall costs. Kim explained, "In addition to rising material costs due to factors such as raw material prices, logistics cost burdens have also increased compared to before." He noted, "External factors, including a continuously declining exchange rate, resulted in unfavorable outcomes for third-quarter profitability."

The outlook for the fourth quarter was also set conservatively. Kim said, "It will be difficult for profitability to dramatically turn around in the fourth quarter as well." He added, "The variable is the Middle East war; it could end, so it is difficult to make a definitive statement." He continued, "Sales growth will continue in the fourth quarter as well."

Regarding third-quarter sales, he assessed, "Wholesale and retail sales, as well as market share, all grew compared to last year." He noted, "The new car effects of Telluride and Seltos were fully realized, and despite supply disruptions, we responded flexibly according to regional conditions to increase sales."

Kim said, "The burden of raw material prices will be resolved at some point." He added, "In the long term, it can be offset through internal structural improvements."