Kumho's 2017 profits plunge on materials costs, OE decline

Seoul – Kumho Tire Co. Inc. suffered an 81.2% drop in pre-tax operating profit for fiscal 2017, on 2% lower sales.

Kumho's earnings (EBITDA) fell to $57.4 million on sales of $2.55 billion, according to the company's fourth quarter investor relations documents.

As a result, the operating ratio fell more than nine points to 2.3%. The operating result turned red to the tune of $139 million. Kumho did not report net earnings.

Kumho cited unfavourable foreign exchange rates, a slowdown in original equipment volume in the U.S. and Europe and higher raw materials costs for the fall in earnings.

Sales in Kumho's home market fell 0.9% to $926 million, primarily due to lower OE sales. Replacement sales were up due to "robust" growth of winter products. Business in China dropped 11.4% to $302 million on "lacklustre" replacement demand.

Sales in North America rose 1.1% to $574.2 million on increased replacement demand from national dealers. OE sales were weak due to models equipped with Kumho tires being discontinued.

Business in Europe was unchanged at $353 million as lower OE sales offset replacement market sales gains.