SEOUL, South Korea—Hankook Tire Co. Ltd.'s fiscal 2017 operating income dropped 28.1 percent due to elevated raw materials costs, but management expects profits to rebound in 2018 as the company focuses on increasing its sales of higher value-added products and diversifying its OE portfolio.
Operating income fell to $701.8 million on 2.9-percent higher revenue of $6.02 billion, Hankook reported, dropping the operating ratio five points to 11.6 percent.
The company did not disclose net earnings at this time.
Hankook attributed the revenue growth to increased sales of larger rim-diameter passenger and SUV tires and said all regions contributed to improvement.
Sales of tires in the 17-inch and larger rim-diameter category accounted for 48.4 percent of sales, Hankook said, an increase of 3.9 percentage points over 2016. The gains were recorded in both the OE and replacement markets, especially in Europe and China.
In North America, Hankook said its replacement sales improved due to strengthened distribution channels and an expanded supply of OE tires to the transplant assembly operations of Japanese car companies.
The Seoul-based tire maker is targeting revenue growth in 2018 of nearly 9 percent to roughly $6.5 billion with operating profits recovering to their 2016 level of about $900 million.
The earnings decline was particularly noticeable in the second half of the year. Profits fell 29.2 and 41.6 percent in the third and fourth quarters, Hankook said.
The company has been active of late securing new OE fitments in North America, including positions on the 2108 Toyota Camry, Honda Accord and Lincoln Navigator.
In October, it commissioned production at its first U.S. plant, in Clarksville, Tenn.