Analysis: Pressure on rubber components makers

Major manufacturers of industrial rubber products have reported mixed year-to-date business results with, at best, modest expectations for trading conditions in the final quarter of the year.

Typifying a general trend, third-quarter earnings at ContiTech were “dented by continued weak industrial development in Europe and North America,” reported parent Continental, which does not expect its industrial business to recover in the final quarter.

ContiTech, it added, continues to “contend with a weak industrial environment in Europe and North America. With this down phase lasting longer than expected, we are examining additional measures to deal with the economic situation.”

Downgrading its previous forecast, Continental now expects full-year sales at ContiTech of around €6.2-6.6 billion, down from an earlier forecast of €6.6-7.0 billion.

Trelleborg reported flat sales for the third quarter of 2024 as some market segments and geographies “moved in different directions,” while negative currency exchange effects offset slightly higher organic sales and contributions from acquisitions

During the latter part of the third quarter, the macroeconomic environment weakened, particularly affecting some industrial segments, noted Peter Nilsson, president and CEO of the Swedish group.

This, said Nilsson, mainly impacted deliveries to construction and agricultural machinery sectors, while the underlying demand remained “at a good level” within the aerospace industry.

Trelleborg Industrial Solutions reported flat sales of SEK3.6 billion during the third quarter but earnings fell 8% year-on-year to SEK548 million.

Demand among the industrial market segments was varied, with sales to LNG and larger infrastructure projects growing, while sales to the construction industry remained sluggish in both Europe and North America.

Trelleborg Medical Solutions reported a 32% year-on-year increase in revenue to SEK852 million, supported largely by the acquisition of Baron Group, which helped to boost earnings by 67% year-on-year to SEK165 million during the period.

Trelleborg Sealing Solutions reported a 1% year-on-year decline in earnings to SEK826 million, as revenue fell 1% to SEK4.1 billion – though the unit expects synergies from the acquisition of Minnesota Rubber & Plastics in the US to bolster sales and earnings next year.

With external factors now creating “significant uncertainty,” Nilsson said the group expected to see slightly lower demand in the final quarter of the year, compared to the third quarter.

Austrian group Semperit linked a substantial increase in its nine-month earnings – despite a dip in sales – to a cost-cutting programme and its realignment into two divisions: Semperit Industrial Applications (SIA) and Semperit Engineered Applications (SEA).

Despite the uptick, Semperit’s outgoing CEO Karl Haider cautioned that the group was still “facing headwinds from the overall market” with the challenging environment set to persist into 2025.

By segment, hoses and profiles maker SIA saw a 16.1% year-on-year decline in sales to €222 million, amid a “shift in the product mix and the persistently challenging economic situation.”

However, SEA, which includes ‘form’, belting and Rico/LSR operations, posted an 11.7% increase in sales to €285 million, despite lower volumes within the belting segment.

Semperit’s total expenses during the nine months decreased by 3.2% year-on-year to €446.6 million, as cost of materials (including energy and purchased services) fell by 9.5% to Ä213.5 million.

Personnel expenses increased to 9.2% year-on-year to €166.4 million, mainly due to the takeover of Rico Group last year.

In the US, Northville, Michigan-based Cooper-Standard reported a decline in third quarter earnings due to “the timing of commercial settlements in the same quarter of 2023, unfavourable foreign exchange, continuing general inflation and lower overall production volumes.”

With softer projections for light vehicle production in 2024, inflation and unfavourable foreign exchange rates, the US lowered its full-year outlook: sales now expected to come in around $2.70-2.75 billion from a previous $2.8-2.9 billion and adjusted earnings to reach $180-195 million, versus $180-210 million before.

In Japan, meanwhile, Toyoda Gosei (TG) saw sales and operating profit decline in the second quarter of its fiscal year on lower global demand and production cuts by vehicle makers.

During the three months ended 30 Sept, TG reported ‘production cuts by major automotive customers outside of India, especially in Japan, the Americas, and China.’

TG reported mixed sales trends across the main global regions, with year-on-year increases in Europe and the Americas but declines in China and elsewhere in Asia.

In the Americas, revenue was up 4.8% year-on-year at Yen200 billion while operating profit fell 1.7% to Yen14.3 billion.

Here TG said vehicles production by customers decreased but revenue was up due to a weaker yen. The decline in profits, it added, was cushioned by rationalisation efforts.

In Japan, sales fell 7.4% year-on-year to Yen200 billion, while operating profit declined 40% to Yen4.9 billion due to lower sales, reported TG.

Sales in China declined by 20% year-on-year to Yen47 billion, due to lower production by major automotive customers. Operating profit for the region declined significantly by 92% to Yen195 million due to lower sales.

Asia also witnessed a 2.7% year-on-year decline in second-quarter sales to Yen65.7 billion, while operating profit fell by 12% to Yen5.8 billion due largely to lower car production in Thailand.

India was the only region to report increased automotive production, with TG increasing second quarter sales by 23% to Yen20.4 billion and operating profit by 30.6% to Yen1.8 billion.