Sumitomo Rubber profits rise on lower freight, raw materials costs

Kobe, Japan – Sumitomo Rubber Industries (SRI) has reported a strong recovery in 2023, driven by higher sales and ‘significantly lower costs’.

The Japanese tire & rubber group posted a 350% year-on-year increase in business profit to Yen77.6 billion (€482 million), on 7.2% higher sales of Yen1.7 trillion, SRI announced 14 Feb.

The economic environment during the fiscal year “continued to recover” despite high levels of inflation in certain regions and drastic interest rate hikes, said SRI.

Furthermore, geopolitical tensions in Ukraine and the Middle East and economic stagnation in some regions impacted the overall business environment.

SRI, however, said “significant reduction” in freight costs and a lull in the soaring raw material prices and energy costs helped it “considerably improve” profits compared to 2022.

At the same time, SRI said it worked to strengthen its competitive advantage through developing and expanding sales of high-performance products.

Breaking down segment performance, SRI said its tire business increased revenue 7.1% year-over-year to Yen1.0 trillion, while business profit rose by a sharp 416% to Yen63.5 billion.

In the domestic OE market, sales “significantly exceeded” the levels of last year, as the automotive industry recovered from chip shortage crisis.

In the domestic replacement market, however, sales slightly declined due to sluggish shipments in the third quarter, affected by the price increases of winter tires in July, and a warm winter.

In the overseas OE market, sales were almost on par with last year, reflecting increased sales in Europe and the US, and declines in China and Indonesia.

In the overseas replacement markets, demand in Asia and Oceania remained “at a low level” but sales in China exceeded the previous year, when orders significantly declined due to the impact of Covid-19.

In Indonesia and ASEAN, sales fell year-on-year, as volumes declined “due to the impact of the deteriorating market conditions.”

Volumes in North America fell below the prior year’s level, but sales of flagship Falken tires exceeded the 2022 levels with the strong performance of Wildpeak Series.

In Europe, volumes fell below the level of last year as the “tire replacement frequency was sluggish” and consumer purchasing power slowed down due in part to the prolonged inflation.

In the sports business, SRI saw revenue increase 8.6% year-on-year to Yen126 billion, while business profit rose nearly 40% to Yen12.5 billion.

SRI’s industrial and other products business reported a 136% increase in business profit to Yen1.6 billion, on 5.3% higher sales of Yen44.3 billion.

Sales of rubber parts for medical applications were strong both in Japan and overseas and demand for infrastructure products increased.

However, sales of rubber parts for office equipment declined due to the impact of production adjustments by customers.