Sumitomo cuts 2018 forecast despite half-year gains

Kobe, Japan — Sumitomo Rubber Industries Ltd. (SRI) reported a double-digit improvement in operating profit for the first six months of fiscal 2018 on 5.4% higher sales.

Despite the improvements, SRI is scaling back its sales and earnings forecasts slightly for the fiscal year to reflect the effects of recent fluctuations in raw materials prices and other factors, the company said in its half-year earnings report.

For the half year ended June 30, SRI reported 27.4% higher operating income of $248.8 million on sales of $3.91 billion, raising the operating ratio more than a point to 6.4%. Net income was up 14.4% to 130.8 million.

SRI attributed the earnings improvement to the positive effects of product pricing and lower natural rubber acquisition costs. Offsetting the gains somewhat were higher operating expenses and fixed costs and negative changes in tire volumes and product mix.

The Tire Division reported 18.7-percent better earnings of $190.2 million on 4.2% higher sales of $3.32 billion. SRI reported revenue gains in both replacement and OE business domestically.

Overseas, revenue shot up more than 40% in Europe, due in large part to the acquisition of UK wholesale distributor Micheldever Group in early 2017.

Revenue in North America slipped 6% to $635 million.

For the full fiscal year, SRI reduced its sales forecast by 1.1% from an earlier projection, but said the revised figure would still represent a 2.5% increase over 2017.

The earnings projection was dialled back further (6.8%) to the point the 2018 forecast is just 1.4% better than the fiscal 2017 profit.