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‘Kia’s continued struggles lead to dim Q1 outlook’

April 17, 2017 - 15:13 By Korea Herald
The overall first-quarter outlook for Kia Motors remains dim, with analysts lowering its target stock price and predicting decreased earnings.

“Kia Motors is facing difficulties in major markets such as the US, China and at home. Adversities have most likely led to a poorer performance than market expectations,” said Lee Myung-hoon, an analyst at HMC Investment and Securities. 
(Yonhap)

“The ongoing wage lawsuit at home, uncertainty surrounding operations at the Mexico factory and other negative factors in major markets continue to rise.”

Lee projected Kia Motors would post 12.4 trillion won ($10.9 billion) in first-quarter sales and operating profit of 400.7 billion won, down 1.2 percent and 36.8 percent, respectively, on-year.

The recent recall of Kia Motor vehicles here, in the US and Canada due to faulty engine parts is expected to cost the firm up to 200 billion won, slashing the automaker’s first-quarter operating profit, Lee said.

Looking ahead, May 25 is the date of Kia Motors’ plea hearing in a wage lawsuit filed by 27,000 members of Kia Motors’ labor union in October 2011.

The labor union argues that Kia Motors has to pay workers for overtime and other payments on grounds that their wages should include bonuses. If bonuses are included in their wages, Kia Motors has not distributed payments worth 745.8 billion won to workers, according to the labor union.

If Kia loses the lawsuit, it has to pay a total of 1.42 trillion won, including a 6 percent annual interest rate.

The country’s leading auto firm also suffered a sales decline in China, where it sold 16,006 units in March, down 68 percent on-year, the firm said. The plunge was a result of continued anti-Korea sentiment in China due to the deployment of an anti-missile defense system, or the Terminal High Altitude Area Defense, in South Korea.

Kim Pyung-mo, an analyst at Dongbu Securities, dropped Kia Motors’ target price by 22 percent to 39,009 won last week.

“Considering a low possibility of an improved performance at Kia, compared to rival companies, a stock rally seems unlikely in the short term,” Kim said in a report.

Lee added “Although negative conditions continue to rise, it is unlikely that Kia’s stock price will further fall from the current level.” 

By Kim Bo-gyung (lisakim425@heraldcorp.com)