Yokohama's reports 45% drop in operating profits despite higher sales

TOKYO—Yokohama Rubber Co. Ltd. (YRC) suffered a 44.6-percent drop in operating income for the six months ended June 30, despite nearly 29-percent higher sales.

Yokohama cited the adverse effects of the prolonged Russia-Ukraine war, the rising costs of raw materials and logistics and declines in unit production by auto makers globally for the earnings decline, to $219.1 million.

Sales revenue grew 28.8 percent to $3.18 billion, reflecting "robust growth" in overseas sales of tires, including off-highway tires for agricultural machinery and industrial machinery. The operating ratio fell nine points to 6.9 percent.

Despite the operating income decline, YRC has revised upward its full-year fiscal projections for 2022 sales and earnings that it announced in February. Yokohama now expects sales revenue of nearly $7 billion, up 14 percent over the earlier projection and 27.5 percent over fiscal 2021. Operating earnings are projected to end the year up over the earlier forecast but down nearly 28 percent versus 2021.

YRC's tire segment — which now combines the firm's traditional tire and off-highway tire businesses — reported double-digit gains in first-half sales revenue and business profits.

The tire business unit reported 15-percent better segment business profit of $214.5 on 31.6-percent higher revenue, based on sales gains in both the original equipment and replacement markets both domestically and internationally.

YRC reported it secured new OE fitment contracts in North America and China despite the adverse effects of shortages of semiconductor devices on vehicle production volume worldwide and of the lockdowns in China occasioned by outbreaks of COVID-19.

Among recent successes in the OE market are fitment contracts from Toyota Motor Corp. and Subaru Corp. for their latest-generation battery-electric vehicles, the bZ4X and Solterra, respectively, which are using versions fo the Yokohama Advan V61 product line.

In the replacement sectors, YRC reported "robust" business in Japan, where it benefited from early-year snowfalls and resultant vigor in sales of winter tires, along with sales growth in North America, China, India and other Asian markets by promoting high-value-added products and responding "effectively to robust demand."

YRC's off-highway tire business unit reported 69.4-percent improved segment business profit of $98 million on 28.3-percent higher sales revenue of $643 million.

Yokohama's business in North America in the first half of 2022 was up 40 percent over that generated in 2021, the firm reported, at $796 million.

At the same time, YRC reported progress toward achieving goals set out in its Yokohama Transformation 2023 medium-term management plan for fiscal years 2021–2023 by promoting the "exploitation" of the strengths of its existing businesses and the "exploration" of new value that will meet the needs of customers and society in an era of great change.

YRC stated in its earnings report that it expects its pending acquisition of Trelleborg Wheel Systems Holding A.B. from Sweden's Trelleborg A.B. to be completed as scheduled in the latter half of the year. That business is expected to boost Yokohama's annual sales by more than $1 billion.

The acquisition will be funded by a combination of cash-on-hand and new borrowings. After the deal was announced, the Japan Credit Rating Agency, Ltd. reconfirmed its A+ rating on Yokohama Rubber in consideration of the company's cash-flow generation capacity.

Yokohama did not provide an update on its activities in Russia, where it has one tire plant. In late March, YRC said it was halting production at the passenger tire plant run by its Russian subsidiary, L.L.C. Yokohama R.P.Z., in Lipetsk, in light of Russia's attack on Ukraine.