Yokohama cuts 2019 forecast as OE tire markets wane

Tokyo – Yokohama Rubber Co. Ltd has revised down its full-year forecast for 2019 after posting a 27.4% decline in business profit for the first three quarters, to Yen25.8 billion (€214.3 million), on sales 1.1% higher at Yen465.7 billion.   

Operating profit, however, came in 23.8% higher at Yen33.4 billion, reflecting a gain on the sale of fixed assets in the fiscal first quarter, the Japanese group said in a 12 Nov press statement. 

That increase was linked to “the rise in operating profit and a corporate tax–rate reduction in India, which reduced a tax liability incurred in connection with an operational restructuring in the company’s ATG (Alliance Tire Group) segment.”

In its Tires segment, Yokohama’s sales revenue increased over the nine months to 30 Sept, as a strong performance in the replacement tire market offset a decline in OE sector revenues. 

“Japanese business in that sector was weak, partly because of product changeovers for multiple vehicle models equipped with Yokohama tires,” the group reported. “The continuing downturn in unit vehicle production in China, meanwhile, weighed on Yokohama’s OE business overseas.”

Higher global sales of replacement tires, it said, reflected efforts to promote high-value-added products, including fuel-saving tires, as well as those for SUVs and pickup trucks.  

Also, solid sales of summer tires offset early-year weakness in sales in winter tires in Japan, while Yokohama further benefited from price increases and buying in advance of a rise in national sales tax.

Yokohama linke the decline in business profit to an upturn in unit production costs associated with reduced production volume, an increase in logistics costs, and the appreciation of the yen.

For its Multiple Business (non-tire) segment, Yokohama reported higher revenues and business profit, helped by new orders for high-pressure automotive hoses in overseas markets. 

Yokohma also noted “robust business” in conveyor belts worldwide, while sales of sealants and adhesives advanced on the continuing strength in Japanese business in construction sealants, and in aircraft fixtures and components.

Meanwhile, sales revenue and business profit increased at Yokohama’s ATG segment, which supplies tires for agricultural machinery, industrial machinery and other off-highway applications, Yokohama reported particularly strong demand for its agricultural tires.

For the full-year, Yokohama has revised down its fiscal projections announced in May, due to higher-than-expected logistics costs, the continuing appreciation of the yen, and lower-than-expected sales of tires in OE markets overseas. 

The group now expects: a 7.5% increase in operating profit, to Yen57.5 billion; a 15.6% decline in business profit, to Yen50.0 billion yen; and no change in sales revenue, at Yen650.0 billion. 

This compares to the earlier projections of: 11.5% lower for operating profit, 13.0% lower for business profit, and 1.5% lower for sales revenue.