Sumitomo Rubber increases earnings 190%, expects second-half spike in materials costs

Kobe, Japan – Sumitomo Rubber Industries (SRI) expects an increase in the cost of raw materials in the second half of the year, offsetting the group’s anticipated gains in the first six months of the year.

In a 13 May statement, SRI revised up six-month forecast for business profit (earnings), saying it now expects first half earnings to reach Yen37.5 billion (€222 million), up 8.7% from an earlier estimate in February.

The Japanese group cited the depreciation of the yen for the upward revision, despite an expected decrease in volumes.

Despite the first half-gains, SRI confirmed its February full-year guidance with earnings set to come in at Yen80 billion.

This, the Japanese group said, was due to an expected ‘impact of raw material price hikes in the second half of the fiscal year.”

For the first quarter of the year, SRI reported a strong 190% year-on-year increase in earnings to Yen23 billion, on 5.3% higher sales of Yen291 billion.

The group linked the significant increase in earnings to the depreciation of the yen as well as a “lull” in the soaring freight costs, raw material prices and energy costs.

During the three months ended 31 March, SRI said the global economic environment continued to recover gradually, although some regions remained at a standstill.

Overall, the group said the Japanese economy is expected to continue to recover steadily although a deceleration in overseas economies may depress the domestic business conditions.

Areas of concern, it added, include the global monetary tightening, Chinese economic outlook, uncertainty in the Middle East as well as the trends in foreign exchange, interest, and prices.

In terms of segment performance, revenue in the tire business rose 6.2% year-on-year to Yen244 billion, as earnings saw a staggering 845.2% increase to Yen18.2 billion.

Here, SRI noted a ‘significant fall’ in the domestic Japanese OE market, as some car manufacturers reduced production.

Sales in the domestic replacement market also decline year-on-year, due to “rush demand” in 2023 ahead of price increases implemented that year.

In the overseas OE market, sales declined compared to last year, due to decreased shipments in Southeast Asia despite higher sales in the major Chinese market.

OE sales in China remained “at a low level” due to market stagnation while other Southeast Asia regions also saw an overall sluggish market.

In Europe and Americas, sales increased over last year, as South America remained flat compared to the first quarter of 2023.

SRI’s sports business reported a 3.5% rise in sales to Yen36 billion, but earnings fell 22.6% to Yen4.2 billion.

The group’s industrial and other products business reported a nearly 17% increase in earnings to Yen668 million, on 8.2% lower sales of Yen10 billion.

While sales of rubber parts for medical applications increased in Japan, the sales in Europe “substantially declined” as the group conducted a stock transfer of its subsidiary in January 2024.

In addition, orders received increased for infrastructure products, but sales of disposable rubber gloves, vibration control business and rubber parts for office equipment decreased.