Yokohama reports HI earnings slump

Tokyo –  Yokohama Rubber Co. has posted a 37.9-percent fall in operating profit, to Yen15.7 billion (€139 million) on first-half sales of Yen268.1 billion, 9.5-percent lower than a year ago.

The company linked the lower profitability to a unit-decline in Japanese vehicle production, weakening demand and declining prices in Yokohama’s principal product sectors.

These factors, combined with a strengthening of the yen more than offset the continuing downturn in raw material prices over the six-months to 30 June.

Operating income in Yokohama’s tire segment fell 37.6 percent, to Yen12.1 billion, on 10.1-percent lower sales, at Yen208.2 billion, Yokohama reported 10 Aug.

OE sales in Japan fell amid a downturn in both unit vehicle production and tire prices, though Yokohama managed to increase “operating profitability by improving its composition of sales.”

In the Japanese replacement market, Yokohama’s unit sales volume declined, but the company again increased operating profitability: by promoting high-value-added products and improving the composition of its sales portfolio.

Sales outside Japan, it said, fell due to the stronger yen and escalating price competition despite an overall increase in unit sales volume. The sales-volume gains reflected “robust growth” in North America, new sales channels in Europe, and increased shipments to vehicle makers in China.

In Yokohama’s ‘multiple business’ segment – mainly high-pressure hoses, sealants & adhesives, electronic equipment coatings, conveyor belts, anti-seismic products; marine hoses and fenders, and aircraft parts – operating income fell 37.1 percent, to Yen3.5 billion yen, on sales 7.7 percent lower at Yen56.3 billion.

Sales in high-pressure hose declined, due in part to lower demand for automotive hoses. Sales also declined in industrial materials amid the strong yen and a downturn in Japanese steel production.

Operating income increased in sealants & adhesives and electronic equipment coatings, driven largely by higher sales of automotive sealants in China. Sales to this sector declined overall, though, on slumping Japanese demand for construction sealants.

With its half-year results announcement, Yokohama said it now projects that "profit attributable to owners of  parent" will decline 44.9 percent, to Yen20.0 billion, on a 30.3-percent decline in operating income, to Yen38.0 billion, and a 4.7-percent decline in net sales, to Yen600.0 billion.

Yokohama acquired Alliance Tire Group BV (ATG) in July and will begin including that company in its consolidated accounts in the third quarter (July to September) of 2016.

ATG’s inclusion has augmented Yokohama’s full-year projections for net sales by Yen27.0 billion, while diminishing operating income by Yen4.5 billion.

The lower projection for operating income is the net result of recording a Yen4.7-billion contribution from ATG and acquisition-related expenses estimated before the merger as Yen9.2 billion, said Yokohama.