Sumitomo dips into red on 21% lower first half sales

Kobe, Japan — Sumitomo Rubber Industries Ltd. (SRI) fell into the red on an operating and net basis for the six months ended 30 June on 21% lower sales, reflecting "extremely harsh" global economic conditions during the Covid-19 pandemic.

Sumitomo reported an operating loss of Yen3 billion (€24 million) on sales of Yen340 billion. The net loss was Yen9.3 billion, compared to Yen6.3 billion of profit reported in the first half of 2019.

Overall, Sumitomo said an "extremely severe" business environment impacted by the pandemic caused the sales environment to deteriorate significantly. 

The company noted in particular the Japanese economy faced "extremely harsh conditions" because economic activities were restricted and the employment situation deteriorated in addition to lower personal consumption, export and production.

At the same time the Japanese yen continued to appreciate against the Euro and emerging country currencies and the prices of natural rubber and petroleum-based raw materials fell and remained low.

Under these circumstances, the company said it pursued various initiatives to reinforce its business foundations and improve profitability with the goal of accomplishing the New Mid-Term Plan, which sets 2025 as the target fiscal year.

Sumitomo’s tire business unit also fell into the red during the period, reporting a business loss of Yen900 million, down from gains of Yen12.7 billion the year before. Sales revenue fell 20.5% year on year to Yen290 billion. 

The company reported lower replacement and OE market sales, both domestically and internationally.

In Japan, OE sales revenue fell because of a substantial decrease in vehicle production, although demand for high-performance products, particularly fuel-efficient tires, improved. 

Replacement market sales were down both due to the slow economy and lower winter tire sales.

In overseas markets, OE sales fell due to substantial drops in vehicle production in numerous regions, while replacement market sales revenue declined sharply in Asia/Oceania and demand was weak in the Europe/Africa region and the Americas.

Sumitomo’s sports segment, which includes Dunlop and SRIxon branded sports products, reported a loss of Yen2.9 billion on 31% lower sales of Yen29.8 billion.

Industrial products segment, which manufactures rubber good and parts for industrial and medical sectors, reported a 26% increase in profit at Yen1.5 billion, on 2% higher sales of Yen19.4 billion.

Looking ahead, Sumitomo said it expects the sales decline for the second half to be around 10%, with China and North America leading the way in market recovery.