Kia Motors profit beats forecasts

Seoul: Kia Motors, South Korea's No 2 auto maker, yesterday posted a better-than-expected quarterly operating profit, swinging from a loss a year ago, boosted by a weaker won and lower costs.

The turnaround helped Kia's shares jump as much as 6.75 per cent to 9,960 won during the morning, outperforming a 1.1 per cent rise in the broader market.

A softer won is expected to boost earnings at Kia this year as the maker of the Sportage sports utility vehicle (SUV) sells about 80 per cent of its products abroad.

The Mohave, also known as the Borrego, its recently launched SUV, and the revamped Morning minicar are likely to lift Kia's sales in Korea, a market that carries higher margins.

But growth prospects in the United States and China, the world's two top auto markets, are clouded by weak demand and fierce competition.

Rising prices of raw materials, a lack of a clear hit model and continuing losses at overseas sales units are other concerns for Kia, analysts said.

"Kia will benefit from the recent trend of rising demand for small cars amid higher oil prices and a softer won.

Other new models are also expected to help the company further. But it still faces risks in overseas markets," said Song Sang-hoon, an auto analyst at Heungkuk Securities.

Kia plans to launch a revamped version of the Cerato compact sedan and a small crossover utility vehicle (CUV) in September.

For 2008, Kia, an affiliate of the country's top car maker Hyundai Motor, is expected to post a sharp jump in net profit to 266.3 billion won ($280.6 million) this year, according to a poll of 26 brokerages by Reuters Estimates, almost 20 times last year's 13.6 billion won profit.