Kia Motors Corp., South Korea’s second-largest carmaker owned by Hyundai Motor Group, earned nearly 200 billion won ($178 million) in operating profit in the third quarter despite massive reserves set aside for recalls over engine defects, raising hopes for better quarters ahead with a more versatile product mix.

Kia Motors said in a regulatory filing on Monday that it raised 195.2 billion won in operating profit on a consolidated basis in the third quarter ended September, up 34.5 percent from the previous quarter but down 33.02 percent from the same period a year ago.

The company’s net profit reached 133.7 billion won, up 5.84 percent from the previous three-month period but down 59 percent from the previous year. Sales were up 43.6 percent on quarter and 8.17 percent on year at 16.3 trillion won.

The company reported operating profit despite 1.26 trillion won worth of reserves reflected in the third-quarter books to cover for quality defects of Theta 2 GDi engines. Its sister company Hyundai Motor Co., the largest automaker in Korea, reversed from a profit to an operating loss of 313.8 billion won in the third quarter due to reserves for voluntary recalls for engine defects. But their year-on-year fall in operating profit did not come as a surprise after the sister companies already warned of massive allowances for quality control last week.

Kia shares gained 10.32 percent to close Tuesday at 52,900 won in Seoul.

The company said in a conference call that it was able to minimize losses from massive provisions thanks to brisk sales of high value-added products such as recreational vehicles and new models K5, Sorrento, and Carnival.

Kia Motors’ global sales reached 699,402 units in the third quarter, down 0.4 percent from the same period a year ago.

At home, it sold 136,724 units, up 3.2 percent from last year, on strong demand for new Carnival model and steady sales of the K5 sedan and the Sorrento sport utility vehicle. It shipped 562,678 units overseas, down 1.3 percent on year. Sales surged in some markets – 4.2 percent in Europe, 175.7 percent in India, and 15.1 percent in China – amid eased Covid-19 restrictions. Sales in North America, however, contracted 5.5 percent on year and in other markets 19.7 percent.

According to the company, sales of recreational vehicles accounted for a record 57.8 percent of total sales, up 9.1 percentage points from the same period a year ago. In Korea, demand for the new Sorrento and Carnival models was high while in North America for Telluride and Seltos.

Kia Motors said global auto demand is gradually recovering from the Covid-19 nadir. Uncertainties will likely remain for a while due to protectionism on the global trade front and the resurgence of Covid-19, but with a slew of major new model launches including the K7, Sportage SUV and electric vehicles that generate more profits, the company is expected to improve earnings further.

By Lee Eun-joo

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