Sumitomo Rubber profits decline 46% as cost pressure continues

Kobe, Japan – Sumitomo Rubber Industries (SRI) has seen a 46% year-on-year decline in business profit to Yen8 billion during the first quarter of 2023.

The earnings reversals was due mainly to higher costs and a slow global economic recovery, the company reported 15 May.

Revenue for the first three months of the year rose 10% compared to the year before, to Yen276 billion, SRI's financial statement shows.

The economic environment, said the Japanese tire & rubber group, remained uncertain in terms of growth, due particulraly to the crisis in Ukraine.

In addition, it said, high levels of inflation in certain regions and drastic interest rate hikes added further economic pressure.

In Japan, SRI said an expected post-Covid recovery was hampered by rising uncertainty and trends in foreign exchange and prices.

The group’s key tire segment saw business profit decline by more than 81% to Yen1.9 billion, despite a 9% increase in sales to Yen230 billion.

In the local Japanese OE market, SRI said “signs of recovery were seen”, with ‘recent sales’ exceeding the levels the year before.

However, the fallout from ongoing production cuts at automotive vehicle manufacturers led to “sluggish sales”, it added.

In the local replacement market, sales was slightly down, but certain segments, such as winter tires reported year-on-year improvement.

In the overseas OE market, sales “slightly exceeded” the year before, as the automotive industry recovered from Covid.

The replacement market, however, saw a decline, particularly in Asia and Oceania, with gradual recovery in China.

In Indonesia and Thailand, sales grew year-on-year, due in part to the easing of Covid restrictions.

In Europe, sales volumes fell below the prior year’s level as demand decreased due to “growing inflation”.

In the Americas region, sales grew slightly, supported by “solid” performance in South America.

In the ‘sports business’, sales grew 19.5% to Yen35 billion, while business profit increased 37% to Yen5.5 billion.

The business unit was buoyed by higher sales in the ‘golf goods market’, particularly in North America and South Korea.

Sales also grew in the tennis goods markets, with demand strong in all regions, particularly in Europe.

SRI’s industrial and other products business also grew during the period, with business profit up 70% at Yen572 million, on 15.6% higher sales at Yen11.5 billion.

The unit was particularly buoyed by higher orders of rubber parts for medical applications and infrastructure products.