TOKYO—Yokohama Rubber Co. Ltd. suffered a 90.4 percent plunge in operating profit and posted a net loss for the quarter ended March 31 on a pandemic-driven double-digit sales drop.
At the same time, Yokohama said "massive business disruption" caused by COVID-19 will necessitate revisions in the full-year fiscal projections, but it is unable to do so at this time because the "full extent of that disruption is impossible to determine."
Yokohama will release its revised business projections as soon as management secures a "firm grasp" of the fiscal outlook.
For the first quarter of fiscal 2020, Yokohama reported operating earnings of $11.4 million on 13.7 percent lower revenue of $1.19 billion. The net result was a loss of $2.37 million.
Yokohama's tires segment reported business profit loss of $4.6 million on 12.7 percent lower sales of $802.7 million. YRC said the drop in business profit reflected a decline in unit sales volume, an increase in production costs associated with reduced production volume and inventory-adjustment costs occasioned by a tire recall in North America.
Yokohama reported revenue declined across the board, in both original equipment and replacement businesses, both domestically and internationally.
The OE drop reflected production adjustments necessitated by a decline in Japanese demand associated with the COVID-19 outbreak and by suspended operation at vehicle plants in overseas markets.
The sales decline in Japan also was affected by reduced demand for winter tires in Japan on account of warmer-than-usual winter temperatures at the outset of the year, YRC said.
Business in replacement tires generally was "sluggish" in overseas markets, too, YRC said.
Yokohama's ATG farm/OTR tire business unit fared better than the company overall or the tire business unit, posting an earnings decline of 27 percent to $16.4 million on 17.5 percent lower revenue of $142.7 million.
Tire-related revenue in North America (tire and ATG units) fell 9.2 percent in the period to $288 million.
The company said it is implementing a number of measures to maintain a "sound financial position" in the face of the COVID-19 challenge. Among the measures are:
- fortifying short-term liquidity through optimal fund raising;
- paring cash expenditures by deferring capital spending and trimming costs; and
- reducing compensation for directors, officers, associate officers and managers.
During the quarter, Yokohama factories worldwide were idled for varying lengths of time. This involved:
- Japan: Closed for several days during May's Golden Week holidays
- China: Operations halted Feb. 3-17 per government order; shutdowns for several days in March and April for production adjustments; return to normal next month in June;
- Philippines: Operations halted from March 18 per government order; gradual resumption under way since April 8;
- Thailand: Shutdowns during April 10-15 and April 27-May 3 for production adjustments; gradual resumption under way with additional production adjustment shutdown planned for late May;
- North America: Mississippi truck tire plant idled March 28 - April 26; Virginia car tire plant shut since April 5, per government order.