SEOUL - Bankrupt Kia Motors Corp. surprised analysts by announcing that it expects to earn a profit of 140 billion won ($116.6 million) in 1999. If that happens it would be the largest profit in the company's history.
When placed under Hyundai Motor Co. control last year, new management said it did not expect a profit before 2001. Kia Motors lost 6.6 trillion won in 1998.
Kia also said that it plans to go ahead this month with legal procedures to be released from court receivership status. Kia was taken over by Hyundai Motor in a court-led auction of the automaker. In July 1997, the company went bankrupt after the Kia Group collapsed under total debts of 10 trillion won.
Not all analysts were surprised by the good news. Anticipating Kia's comeback, Merrill Lynch in July issued a buy recommendation for Kia stock.
'In our view, Kia is a turnaround story,' said Merrill Lynch. '(There has been) a significant downsizing to 31.1 cars per employee in 1999 from 23.6 in 1996.'
Han Kum-Hee, Korean auto equities analyst and vice president of Merrill Lynch & Co., cited cost savings from combined purchasing and R&D with Hyundai as key factors in the recovery.
A Kia spokesman said the company will achieve its annual sales goal of 837,000 units this year. He said Kia aims to grow sales by 31 percent to 1.1 million units next year.
'We expected that our annual profit this year would be at the level of 100 billion won. But at present we are very optimistic that the total profit volume will reach 140 billion won by year end,' said an executive in the company's accounting department.
He said the revised forecast is based on a rise in monthly sales to 83,000 units in September compared with a break-even point of 65,000.
Kia's rebound is due largely to its newest minivan models, Carnival, Carens and Carstar. Domestic customers are waiting months for Carens and Carstar, the compact minivans introduced earlier this year. The company's minivan lines are working around the clock, even on holidays.
Also, Kia expects to exceed its export target of 83,700 units for this year.
Cost-cutting has lowered the break-even point, which stood at 75,000 units early this year. Kia expects to maintain monthly sales above 90,000 units.
Prospects look good for next year, too. Kia is scheduled to launch its Avella/Aspire replacement and introduce a new mid-size passenger car.
'We expect 15.1 percent and 14 percent revenue growth in 2000 and 2001, respectively,' said the Merrill Lynch report.
'Operating margins are expected to improve to 6.1 percent in 2000 and 7.8 percent in 2001 (from 3.4 percent in 1999) due to continuing volume increase and cost savings from combined purchases.'