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August 11, 2016 02:00 AM

Yokohama Rubber reports declining sales, earnings

European Rubber Journal Report
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    TOKYO—Yokohama Rubber Co. Ltd. posted a 37.9 percent fall in operating profit on 9.5 percent lower sales for the half year that ended June 30.

    The results prompted top management to revise the firm's full-year fiscal projections downward.

    The company linked the lower profitability to a unit decline in Japanese vehicle production, weakening demand and declining prices in Yokohama's principal product sectors. These factors, combined with a strengthening of the yen, more than offset the continuing downturn in raw material prices over the six months to June 30.

    The operating profit fell to $143.1 million, while sales slipped to $2.44 billion, dropping the operating ratio more than three points to 4.9 percent. Net income plunged 49.3 percent to $75.1 million.

    Operating income in Yokohama's tire segment fell 37.6 percent, to $110.3 million, on 10.1 percent lower sales of $1.9 billion, Yokohama reported, as original equipment sales in Japan fell amid a downturn in both unit vehicle production and tire prices. Despite this, Yokohama managed to increase “operating profitability by improving its composition of sales.”

    In the Japanese replacement market, Yokohama's unit sales volume declined, but the company again increased operating profitability by promoting high-value-added products and improving the composition of its sales portfolio.

    Sales outside Japan, it said, fell due to the stronger yen and escalating price competition despite an overall increase in unit sales volume. The sales volume gains reflected “robust growth” in North America, new sales channels in Europe and increased shipments to vehicle makers in China.

    In Yokohama's “multiple business” segment—mainly high-pressure hoses, sealants and adhesives, electronic equipment coatings, conveyor belts, anti-seismic products; marine hoses and fenders, and aircraft parts—operating income fell 37.1 percent on 7.7 percent lower sales.

    With its half-year results announcement, Yokohama said it projects operating income for the full fiscal year will fall 30.3 percent from fiscal 2015 on 4.7 percent lower sales as “profit attributable to owners of parent” will decline 44.9 percent.

    Yokohama said it will begin including the results of Alliance Tire Group B.V.—acquired in July—in its consolidated accounts in the third quarter. ATG's inclusion will boost Yokohama's ales by about $245 million this year, but will pull down earnings by about $40 million due primarily to acquisition-related expenses.

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