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November 13, 2018 01:00 AM

Sumitomo downgrades fiscal 2018 earnings outlook on rising costs

Tire Business Report
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    KOBE, Japan—Sumitomo Rubber Industries Ltd. (SRI) has downgraded its earnings forecast for fiscal 2018 for a second time, after suffering a 25 percent drop in operating profit for the quarter ended Sept. 30.

    The latest forecast, which takes into account a projected 30 plus-percent decline in business profits in the fourth quarter drops the operating income by 11 percent from the mid-August outlook to roughly $545 million.

    SRI cites rising raw materials—in particular crude oil and natural rubber—as well as fixed costs and eroding prices, and an unfavorable price/mix component as key factors for the fourth quarter outlook.

    For the quarter ended Sept. 30, SRI reported an operating profit of $60 million on marginally lower sales of $1.92 billion, yielding an operating ratio of 3.1 percent, down nearly two points from 2017.

    For the nine month period, the operating profit was up 12.1 percent over the corresponding 2017 period to $306.2 million, based on a strong first-half performance. Sales for the three quarters rose 2.9 percent to $5.78 billion.

    Net income was up marginally to $155.8 million.

    SRI's tire business unit reported nine month operating income of $245 million—up 11.1 percent—on 1.9-percent higher sales of $4.92 billion.

    The company attributed the sales revenue gain to higher original equipment and replacement market sales in the Japan domestic market as well as to sales gains in key overseas markets.

    From a units-sold perspective, SRI's figures show declines in North American and Asian replacement sales but healthy gains in OE deliveries outside of Japan.

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