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May 08, 2018 02:00 AM

Kumho's 2017 profits plunge as materials costs rise, OE volumes fall

Tire Business Report
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    SEOUL, South Korea—Kumho Tire Co. Inc. suffered an 81.2 percent drop in pre-tax operating profit for fiscal 2017, on 2 percent lower sales.

    Kumho's earnings before interest, tax, depreciation and amortization (EBITDA) fell to $57.4 million on sales of $2.55 billion, according to the company's fourth quarter investor relations documents. As a result, the operating ratio fell more than nine points to 2.3 percent. The operating result turned red to the tune of $139 million. Kumho did not report net earnings.

    Kumho cited unfavorable foreign exchange rates, a slowdown in original equipment volume in the U.S. and Europe and higher raw materials costs for the fall in earnings.

    Sales in Kumho's home market fell 0.9 percent to $926 million, primarily due to lower OE sales. Replacement sales were up due to "robust" growth of winter products. Business in China dropped 11.4 percent to $302 million on "lackluster" replacement demand.

    Sales in North America rose 1.1 percent to $574.2 million on increased replacement demand from national dealers. OE sales were weak due to models equipped with Kumho tires being discontinued.

    Business in Europe was unchanged at $353 million as lower OE sales offset replacement market sales gains.

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