Sumitomo revises down 2021 earnings forecast

KOBE, Japan—Sumitomo Rubber Industries Ltd. returned to the black for the quarter ended Sept. 30 on 8.4 percent higher revenue as the company reported sales improvements in all its geographic regions.

The company, which goes to market in North America and Europe primarily with the Falken brand, reported operating income of $11.8 million for the period on sales revenue of $1.97 billion.

For the nine-month period, operating profit jumped nearly five-fold to $271.8 million on 21.6 percent higher revenue of $5.97 billion. Net earnings were $188 million, reversing a net loss a year ago.

During the period, SRI said the global economy continued to recover as a whole, although it faces harsh conditions in some areas due to the impact of COVID-19.

The company's business was impacted by the rising prices of natural rubber and petroleum-based raw materials as well as soaring marine transport costs. There were some positive signs, though, such as recovering markets in the U.S. and China in addition to the improvement in the export environment due to the weakening of the yen against other major currencies.

The Japanese economy witnessed signs of weakness in personal consumption and exports.

Under these circumstances, SRI said it worked to strengthen its competitive advantage by expanding sales of high-performance products that meet the needs of customers in each region, while at the same time maximizing the effects of its manufacturing and sales bases in major markets.

Because of these and other business environment factors, SRI has revised downward its earnings forecast for fiscal 2021. The company's new forecast shows a 20-percent drop in operating income and a 0.5-percent decline in sales. As such, the operating ratio would drop a full point to 4.6 percent.

SRI's tire business unit reported a slight operating loss for the fiscal third quarter on 7 percent higher sales of $1.66 billion. For the nine months, operating income improved three-fold to $211.8 million on 19.7 percent higher sales of $5.02 billion.

The unit's sales growth was due to increases in replacement market business in overseas markets, particularly in Asia/Oceania but also in North America and Europe/Africa, SRI said. Overseas sales offset lower revenue in the domestic market.

Sell-out was strong in North America, SRI said, especially in terms of SUV tires and other high-performance products. However, the volume of imports was restricted as a result of the tight supply and demand situation of shipping containers, and the business was greatly affected by soaring transportation costs.

Overall, SRI's revenue in North America grew 26.5 percent for the nine months to $1.28 billion.