KOBE, Japan—Sumitomo Rubber Industries Ltd. reported a 5.2 percent improvement in operating income for the six months ended June 30, despite a 3.9 percent drop in sales.
Sumitomo attributed the operating income gain, to $273.4 million, to cost-reduction activities throughout the company's operations, while an appreciating Japanese yen took its toll on sales revenue, which fell to $3.32 billion. As a result, the operating ratio improved marginally to 8.2 percent.
The profit attributable to shareholders—roughly equal to net income—shot up 40.5 percent to $249.6 million on the positive effects of extraordinary income from the sale of Goodyear shares SRI held as part of the firms' global alliance that was dissolved last fall.
SRI's tire business reported a 0.3-percent drop in operating income to $243.7 million on 3.5 percent lower sales of $2.85 billion.
Sales volume increased in a number of categories, including the domestic replacement market and the replacement markets in North America and Europe, where SRI said it now has a “greater degree of flexibility” because of the dissolution of the global alliance with Goodyear.
OE sales volumes were down domestically and in China and Indonesia, SRI said, but increased in Brazil—where OE deliveries started just last year—Thailand, South Africa, North America and Europe.
Sales revenue in North America jumped 23.4 percent to $627 million.
Overall, though, sales revenue fell due to the effect of yen appreciation.
In general, Sumitomo said despite relatively low natural rubber and crude oil prices, business conditions “remained severe due to intensified competition with our competitors in the market resulting from the sluggish demand caused by a worldwide sentiment of economic stagnation,” as well as further yen appreciation.
Because the six-month results fell below SRI's expectations, the company has revised downward its full-year forecast for fiscal 2016 to the point it expects the results to fall short of the fiscal 2015 results.
SRI revised downward the operating income forecast by 12.5 percent and that for sales by 5.8 percent.