Sumitomo exceeds mid-term targets, expects further divestments

KOBE, Japan—Sumitomo Rubber Industries Ltd. exceeded the 2023 targets set out in its four-year mid-term plan (2023-27), as it continues to focus on profit improvement and cash generation.

For 2023, the Kobe-headquartered group achieved a business profit rate of 6.6 percent, significantly higher than the initial target of 2.9 percent envisaged for the year. And rate of invested capital (ROIC) stood at 5.7 percent, compared to the target of 2.6 percent initially planned, SRI announced Feb. 14.

By 2027, the group is targeting a business profit rate of 7 percent and ROIC of 6 percent, SRI said in its latest update.

The company said North America turned profitable during 2023, "making more progress than initially planned."

SRI linked the performance to the strong sales of Falken tires in North America, as well as "external factors" like lower ocean freight costs, which improved the profitability of imported products.

The group said it will continue to focus on North America profitability and will "consider all options while working on further improvement."

Among other measures, SRI said it aimed to improve the profitability of its imported products into North America, noting an expansion program at a production facility in New York will help achieve further profitability.

SRI said it is "halfway through" the expansion project, which aims to nearly double the capacity at the plant in Tonowanda, N.Y., by end of this year.

Other initiatives to enhance profitability will include structural reforms across 10 non-tire businesses, of which two—a gas hose business in Japan and medical rubber parts unit in Switzerland—have already been divested.

SRI expects to complete the divestment of four more businesses in 2024, and the remaining four by the "turning point year of 2025."

The move will enable the group to shift resources to businesses where growth is expected.

In the tire segment, SRI said it will focus on new technology and improved efficiency to increase profits. As part of this, the group aims to commercialize its sensor-less sensing core technology this year.

The "fully-fledged business" will aim to achieve business profit of $66 million or more by 2030.

To that end, SRI will develop total vehicle failure prediction solutions through its strategic partnership with Viaduct.

Furthermore, the group's proprietary Sensing Core technology has been adopted in a proof-of-concept project for a smart city in China.

SRI's Sensing Core technology analyzes wheel-speed signals—generated by tire rotation—to detect information such as road conditions and tire load.

Other areas to work on will include the use Japan's NanoTerasu soft x-ray facility to accelerate research on sustaining performance of rubber as well as investment in tire aerodynamic simulation for developing next-generation EV tires.