Kia Motors Corp., South Korea's second-largest automaker, said Friday its net profit dropped 21.6 percent on-year in 2014 as profitability worsened from the strong won and unfavorable business conditions in global markets.

Net income came to 2.99 trillion won ($2.75 billion) last year, compared with 3.82 trillion won reported a year earlier, the company said in a regulatory filing.

Operating profit also fell 19 percent on-year to 2.57 trillion won, the lowest in four years, while sales edged down 1.1 percent to 47.1 trillion won.

"Given the high ratio of exports in our business structure, the 41 won drop in the average exchange rate last year compared with a year earlier and a worsened business situation in Russia amid the weak ruble had an impact, resulting in worsening our profitability," the company said.

"Still, we could defend our overseas profitability to some extent thanks to effective marketing spending and by not cutting prices much based on strong overseas sales," it added.

Shares of Kia Motors closed down 1.89 percent at 49,250 won on the Seoul bourse. The fourth-quarter earnings was released before the market closed.

Kia Motors, an affiliate of market leader Hyundai Motor Co., said it sold 3,041,048 vehicles at home and abroad last year, up 7.6 percent, or 213,956 units, from a year earlier.

The automaker said that brisk demand for the K3, K5 and K7, along with the Sportage R and the Morning, led to the relatively strong global sales last year, adding that the sales figure has exceeded the 3 million mark for the first time.

The company said it aims to sell 3.15 million vehicles this year, a 3.6 percent rise from last year.

Still, global market uncertainty will likely remain high for 2015, the company said, adding that competition from foreign rivals will further intensify, putting a drag on its global sales target.

The company cited Russia's weak ruble and Japanese rivals armed with their depreciating local currency as factors that could keep weighing on its business.

Kia Motors said it expects that this year's car market will be driven not by the United States but by such emerging countries as China and India, saying that it will focus on improving its brand value by rolling out new cars, including eco-friendly vehicles. 

For the domestic market, the carmaker said that it will unveil three new models this year, including the K5 hybrid, all of which will be launched during the second half.

It will also launch four new cars in overseas markets, including a small-sized sports utility vehicle targeted for China, while stepping up its drive to develop eco-friendly vehicles, including hybrid, plug-in and electrical cars.

In a bid to enhance shareholder value, the company said that it will pay 1,000 won per share in cash dividends this year, up 43 percent from what it paid a year earlier. The decision to be approved at a shareholders' meeting would cost the company around 404.1 billion won, it estimated.

"We will keep narrowing the gap in dividend payments with those of other global companies," Han Chun-soo, Kia Motors' chief financial officer said during a conference call held after the earnings results were announced.

"We are also buying back about 1 percent of our existing shares. We will do our utmost in raising shareholder value by giving the belief that performance translates into dividend payment," he added.

The move seems to be in line with Hyundai Motor's push to pay 3,000 won per share in dividends. The amount is more than 50 percent higher than that of the previous year, an increase that comes after it posted a 14.9 percent drop in net profit for 2014.

Hyundai Motor Group that owns Hyundai Motor and Kia Motors also said that it will invest 81 trillion won over the next four years in facilities and new technologies.

Asked if such a massive investment plan could hurt its fiscal health, CFO Han said it would not undermine its fiscal status as the spending will be carried out in phases during the cited period and it will also utilize its available liquidity. (Yonhap)