Fukoku Rubber lowers forecast on Chinese AVS closure

Tokyo – Fukoku Rubber has revised down its earnings and sales forecasts for fiscal 2024 (ending 31 March), due in part to the closure of its Chinese antivibration parts subsidiary.

The Japanese components maker now expects sales to come in at Yen89 billion (€556 million), down 4.3% from an earlier estimate announced in May last year.

Operating profit for the year is set to come in at Yen4.6 billion, down 4.2% compared to the earlier forecast.

Fukoku said the downgrade was due to ‘fully writing down’ of the production equipment held by Shanghai Fukoku Rubber & Plastics Industry, part of the group’s antivibration parts business.

The move, it said, is due to “a decline in profitability caused by the sluggish Chinese construction machinery market.”

The group expects to record an impairment loss of Yen269 million under extraordinary losses.

Over the first nine months of the fiscal year, Fukoku recorded a 1% growth in sales to Yen66.8 billion, while operating profit was up 65% year-on-year at Yen3.7 billion.

The group linked the gains mainly to price adjustments and streamlining efforts intended to mitigate the impact of rising raw material, fuel, and labour costs.

However, Fukoku said the outlook remained uncertain due to geopolitical instability, the prolonged slowing in the Chinese economy, and persistent concern about inflation.

The group noted that the automotive industry is “on track to recover” from lower production volumes due to semiconductor shortages. However, it said, the pace of this recovery varied from region to region.

“Despite aggressive investment in research and development and promotional activities, signs emerged of a reassessment of the shift in demand toward electric vehicles,” it added.

The group’s functional parts business, which produces products such as seals and wiper blades, reported a 4.3% increase in year-on-year sales to Yen30 billion on “steady orders and the impact of foreign exchange rates.”

Segment income grew 32.9% year on year to Yen3.8 billion yen due to streamlining efforts.

The antivibration parts business saw sales grow 2.9% year-on-year to Yen29.2 billion yen due to a recovery in orders and favourable foreign exchange rates. Segment income rose 53.8% to Yen2.4 billion due streamlining efforts.

The group’s hose business, however, reported a 11.2% decline in sales to Yen3.5 billion due mainly to declining demand in Southeast Asia.

By contrast, segment income increased to Yen161 billion, up 170.3% compared to the year before, due to price increases and rationalisation plans.