KOBE, Japan—Sumitomo Rubber Industries (SRI) said it expects an increase in the cost of raw materials in the second half of the year, offsetting the group's anticipated gains in the first six months of the year, as it released its financial report on May 13.
SRI revised its six-month forecast for business profit (earnings) upward, reporting that it now expects first-half earnings to reach $240 million, up 8.7 percent from an earlier estimate in February.
The Japanese group cited the depreciation of the yen for the upward revision, despite an expected decrease in volumes.
Despite the first half-gains, SRI affirmed that its earnings are set to come in at $51 million. SRI attributed that to an expected "impact of raw material price hikes in the second half of the fiscal year."
For the first quarter of 2024, SRI reported a 190-percent increase from from 2023 Q1, to $15 million, on 5.3-percent higher sales of $1.86 billion.
SRI attributed the significant increase in earnings to the depreciation of the yen as well as a "lull" in the soaring freight costs, raw material prices and energy costs.
During the three months that ended March 31, SRI said the global economic environment continued to recover gradually, although some regions remained at a standstill.
Overall, the group said the Japanese economy is expected to continue to recover steadily although a deceleration in overseas economies may depress the domestic business conditions.
Areas of concern, it added, include the global monetary tightening, Chinese economic outlook, uncertainty in the Middle East as well as the trends in foreign exchange, interest and prices.
In terms of segment performance, revenue in the tire business rose 6.2 percent year-on-year to $1.56 billion, as earnings increased a staggering 845.2 percent to $12 million.
SRI noted a 'significant fall' in the domestic Japanese OE market, as some car manufacturers reduced production.
Sales in the domestic replacement market also declined year-on-year, due to "rush demand" in 2023 ahead of price increases implemented that year.
In the overseas OE market, sales declined compared to last year, due to decreased shipments in Southeast Asia despite higher sales in the major Chinese market.
OE sales in China remained "at a low level" due to market stagnation while other Southeast Asia regions also saw an overall sluggish market.
In Europe and Americas, sales increased over last year, as South America remained flat compared to the first quarter of 2023.
SRI's sports business reported a 3.5 percent rise in sales to $23 million, but earnings fell 22.6 percent to $2.7 million.
The group's industrial and other products business reported a nearly 17 percent increase in earnings to $4.26 million, on 8.2 percent lower sales of $6 million.
