Yokohama dials back 2018 forecast

Tokyo – Yokohama Rubber Co. Ltd. has revised downward its earnings outlook for fiscal 2018 despite reporting a double-digit gain in "business profit" for the first nine months of the fiscal year.

Yokohama cited "weaker-than-expected" sales in the tires segment in China, Russia and the Middle East, weaker-than-expected sales of construction sealants and an asset impairment charge related to its US truck tire plant as reasons for the downgrade.

While the revisions are below earlier forecasts, the company's projected sales and operating earnings will still exceed the fiscal 2017 results, the new forecast shows. Yokohama said the revision will not affect dividend payments.

For the period under review, Yokohama reported a business profit — which YRC describes as "basically equivalent" to operating income — of $323.7 million (€287 million) on 1.2% higher sales of $4.19 billion. The earnings were up 13.4%, improving the operating ratio slightly to 7.7%.

Net income fell 25.5% to $151.1 million on the negative impact of the $102 million asset impairment charge Yokohama booked against its Yokohama Tire Manufacturing Mississippi LLC subsidiary.

Yokohama's tire business segment reported a 15.1% improvement in business profit to $215.9 million on 12.1% lower sales. YRC attributed the sales drop to lower OE business in Japan and overseas and lower replacement sales in overseas markets due to adverse weather trends, currency instability in some emerging economies and the negative effect on demand of concerns about US-Chinese trade frictions.

Yokohama achieved sales growth in Japan's replacement market through vigorous promotion of premium-grade tires.

In the ATG (Alliance Tire Group) off-highway tire segment, the business profit rose 19.9% to $57.7 million on 15.1% higher sales of $215.9 million. YRC said the sale increase reflected a recovery in demand for agricultural machinery.

Yokohama's revised projections for fiscal 2018 call for a business profit of about $560 million on sales of $5.9 billion, down 2.4 and 3% from earlier forecasts but marginally higher than the 2017 results.

Net income should come in at about $327 million, down 10% from the forecast as well as the 2017 result.