MRI prepares for 'most challenging' year ahead despite 2021 gains

MILAN—Manuli Rubber Industries S.p.A. (MRI) is operating "under full crisis mode" and believes the next 12 months are likely to be the most challenging since the 2008 financial crisis.

Following two years of COVID-19 effects, a new war in Europe "will not make things any easier," the Italian rubber company said in a March 31 financial statement.

An added challenge is that, amid all the instability, MRI is still in the process of integrating RYCO Hydraulics Pty. Ltd., acquired just as the pandemic reached Europe.

As announced in February 2020, the combined MRI-RYCO business will be a global hose and fittings "leader" with projected revenues of almost $550 million and 4,500 employees.

On another positive note, MRI said demand had been strong in the first three months of 2022 and is "still cautiously optimistic" that sales will hold up for the rest of the year.

For 2021 MRI posted a 35.6-percent year-on-year rise in consolidated operating profit (EBIT) to $52.9 million, on sales 16.4 percent higher at $520 million.

The higher earnings were driven by increased sales volumes and pricing, which offset significant rises in operating costs, noted the Italian group's financial release.

But, while a high level of "market and geographical diversification" will support business levels this year, MRI said the bigger challenge will be in procuring materials and managing rising costs.

"Inventories will need to increase on all counts, from raw materials to finished products, to absorb shortages and longer transportation lead times," the company said.

This will make it "extremely difficult to provide a high service level to customers," warned MRI, adding that "the situation will certainly last for the whole of 2022."

In response, MRI said it is sourcing materials from new suppliers, increasing production capacity in Malaysia and India and introducing selling price increases.

Also on the cards is a "redesign the organization in order to increase efficiency and cut costs" while other actions may have to be considered in the course of upcoming next months.

Regarding the impact of Russia's war on Ukraine, MRI foresees increased lead times, strong price increases of materials, energy and transportation.

Additionally, MRI expects labor shortages in Poland, where on average 30 percent of blue-collar workers in its plants come from the Ukraine - many of whom are leaving to join the army or to help their families.

Meanwhile, the company is still being impacted by the COVID-19 pandemic with lockdowns and/or limitations of mobility and economic activity affecting its operations in many countries.

According to MRI, new COVID-19 waves are resulting in "massive absenteeism due to either illness in eastern Europe, or strong limitations on people's movement in China."