Linglong profits fall more than 65% as commercial tire demand drops

Shanghai, China – Chinese tire major Shandong Linglong Tire Co. expects to report a sharp drop in 2022 profits, due in part to low demand for commercial and replacement tires.

In a Shanghai Stock Exchange filing 31 Jan, the tire maker said it expected ‘net profit attributable to shareholders of listed companies’ to come in between Yuan240 million and Yuan280 million (€32 million - €38 million) , down 65% to 70% from the year before.

Linglong said the decline in profits was due in part to the rising prices of raw materials.

“In 2022, the company was greatly affected by fluctuations in raw material prices,” said the filing.

These, it said, included the sharp rises in the prices of major raw materials such as synthetic rubber and carbon black, which resulted in higher tire production costs and lower gross profit margins.

In addition, Linglong noted a decline in demand for commercial tires.

Citing statistics from the Chinese Association of Automobile Manufacturers, Linglong said in 2022, the production and sales of commercial vehicles in the country stood at 3.185 million and 3.3 million units respectively, down 32% and 31% year-on-year.

“Due to the relatively high proportion of our company's all-steel equipment, it is greatly affected by the decline in production and sales of commercial vehicles,” Linglong added.

Furthermore, a decline in demand in the replacement market and Covid travel restrictions impacted profit margins.

Linglong also noted that ‘repeated epidemics’ had led to suspension of production across its subsidiaries and limited its overall production capacity.