Bridgestone operating profit declines slightly amid high costs

Tokyo – Bridgestone Corp. has reported a slight decline in 2023 operating profit amid a ‘more severe business environment than expected’.

Adjusted operating income for the year came in at Yen480 billion (€2.96 billion), down from the Yen482 billion reported the year before.

Group sales were up 5% year-on-year at Yen4,313 billion, the Japanese group reported 16 Feb.

Revenue, according to Bridgetsone, grew on the improvement of the sales mix of ‘premium’ passenger car replacement tires, with the width of 18” and higher.

Furthermore, Bridgestone also expanded sales of ultra-large/large mining tires, and was helped by a forex tailwind, the group added.

These helped offset the negative impact of a decline in demand in the US & Europe, and Argentina’s hyperinflationary accounting.

Adjusted operating profit decreased year-on-year, due mainly to "decreased sales volume and increased conversion cost."

Meanwhile, the negative impact of manufacturing costs, caused by higher cost of raw materials and inflation, was offset by improvements in price & sales mix, along with “strong expense management, and on-site improvement in production”.

Breaking down the regions, Bridgestone reported a 62% decline in operating profit to Yen25 billion in Europe, Russia, Middle East, India and Africa, on 4% higher sales of Yen908 billion.

Unit sales of replacement tires for passenger cars and small trucks (PC/LT), and for trucks and buses “fell sharply” from the previous fiscal year in the region.

In particular, Bridgestone said demand for truck and bus tires remained sluggish, impacting sales significantly.

Here, the group said it ‘pressed ahead’ with strategic price management and reductions in low profitability areas, mainly for replacement tires for passenger cars.

While price/mix improved, the group noted a “large deterioration” in processing costs caused by inflation, and production adjustments in response to lower volumes.

Japan performed well with a 37% year-on-year increase in adjusted operating profit to Yen206 billion, on 7% higher revenue of Yen1,242 billion.

Unit sales of replacement tires for PC/LT, and trucks and buses were down year-on-year.

However, by focusing on ‘premium’ products and higher selling prices, the group said it mitigated the impact of soaring raw material prices and inflation.

Revenue and profit increased also due to higher sales of mining tires and strong exports of PC/LT and truck and bus tires to overseas markets.

In Asia-Pacific revenue was up 1% year-on-year at Yen461 billion, while adjusted operating profit grew 4% to Yen41.6 billion.

Volumes for OE and replacement PC/LT tires were down year-on-year, while unit sales of tires for trucks and buses were on par with the previous fiscal year.

Sales prices in each country in the region improved with an enhanced sales mix, leading to higher profit.

In Americas, Bridgestone reported a 16% decline in adjusted operating profit to Yen212 billion, on 5% higher sales of Yen2.0 billion.

In North America, unit sales of OE and replacement PC/LT tires remained at the same level as the previous year.

Unit sales for truck & bus tires fell “significantly”, due in part to a “significant slowdown in demand”.

Overall, sales prices and mix improved in Americas region, but processing costs increased due to production adjustments caused by inflation and lower volumes.

Furthermore, the applying of ‘financial reporting in hyperinflationary economies’ for Argentina had a significant Yen10-billion impact on operating profit.

For 2024, Bridgestone said it expected the group’s operating environment to “continue to require careful attention due to various factors”.

Such factors, it said, include fluctuations in exchange rates and the prices of raw materials and feedstock, global economic uncertainty, and unstable international political conditions.

Despite the uncertainties, the group expects to deliver a 10% increase in adjusted operating profit to Yen530 billion, on 3% higher sales of Yen4,430 billion.