KG Mobility Platform swings to operating profit in Q3 as used-car sales rise 7%

KG Mobility Platform, the operator of used-car platform K Car, swung to an operating profit in the third quarter of this year as used-car sales volumes rose and inventory management costs fell. However, revenue dropped 27.8% from the same period last year, leaving a recovery in sales scale as an ongoing challenge.

KG Mobility Platform said Thursday it posted sales of 480.4 billion won ($358 million) and an operating profit of 7.5 billion won in the third quarter. Sales rose 9.4% from the previous quarter's 439.2 billion won, and the operating result swung to a profit from a loss of 33.6 billion won in the second quarter.

The improvement was driven in part by the dissipation of large one-time costs that had weighed on second-quarter results. As the burden of repricing existing used-car inventory eased and the share of newly acquired vehicles in total sales rose, profitability recovered.

Gross profit for the third quarter came to 49.3 billion won, up 19.1% from the previous quarter. The gross margin rose 0.8 percentage points to 10.3% from 9.5%, recovering to a level close to the same period last year. Inventory turnover also accelerated during the quarter.

Sales volumes also increased. Total units sold in the third quarter reached 33,335, up 7.1% quarter-on-quarter. Retail sales — those to individual consumers — climbed 11.2%, with retail revenue rising 11.9% to 423.4 billion won.

Compared with a year earlier, however, the road to a full recovery remains long. Revenue fell 27.8% from 665.5 billion won in the third quarter of last year, and total units sold declined 21.5%. Operating profit was also down 68.8% from 24 billion won in the same period a year ago.

KG Mobility Platform said the Chuseok holiday reduced the number of business days during the quarter, and that a conservative used-car purchasing policy, combined with continued financial pressure on consumers, weighed on sales volumes.

The auction segment also underperformed. Tighter regulations in key export markets and logistics uncertainty dampened overseas demand, pushing auction revenue down 38.3% year-on-year to 38.4 billion won.

Revenue for the first three quarters of this year totaled 1.49 trillion won, down 20.6% from the same period last year, and the company's cumulative results remain in the red. The operating result swung from a profit of 63.6 billion won a year ago to a loss of 11.9 billion won, while the net loss came to 13.1 billion won.

KG Mobility Platform said it plans to focus for now on improving inventory efficiency and per-vehicle profitability rather than aggressively expanding sales volumes, while also working to rebuild retail sales and restore its overall business scale.

The company is also exploring synergies within KG Group. It is examining the possibility of entering overseas used-car markets by leveraging the international network of KGM, the group's automaker affiliate, and plans to expand services in partnership with the group's financial and payments subsidiaries.

KG Group completed its acquisition of K Car in August and brought KG Mobility Platform into the group as a new affiliate. The company is also pursuing a plan to relocate its headquarters to the KG Group office building by the end of this month, a move aimed at strengthening inter-affiliate cooperation.

Beyond its core used-car dealership business, KG Mobility Platform is expanding into new service areas introduced this year, including a peer-to-peer transaction service and a vehicle management service.

"The third quarter was a period in which we confirmed quarter-on-quarter improvement in retail sales and profitability metrics, even amid a management transition and difficult market conditions," said Jung In-kook, chief executive of KG Mobility Platform. "We will strengthen the competitiveness of our core business and pursue profitability improvement and sales recovery in tandem to build a foundation for sustainable growth."