Sumitomo downgrades 2018 outlook on rising costs

Kobe, Japan - Sumitomo Rubber Industries Ltd. (SRI) has downgraded its earnings forecast for fiscal 2018 for a second time, after suffering a 25% drop in operating profit for the quarter ended 30 Sept.

The latest forecast — which takes into account a projected 30-plus-percent decline in business profits in the fourth quarter — drops the operating income by 11% from the mid-August outlook to roughly $545 million (€478 million).

SRI cites rising raw materials — in particular crude oil and natural rubber — as well as fixed costs and eroding prices, and an unfavourable price/mix component as key factors in adjusting the fourth quarter outlook.

For the quarter ended 30 Sept, SRI reported an operating profit of $60 million on marginally lower sales of $1.92 billion, yielding an operating ratio of 3.1%, down nearly two points from 2017.

For the nine-month period, the operating profit was up 12.1% over the corresponding 2017 period to $306.2 million, based on a strong first-half performance. Sales for the three quarters rose 2.9% to $5.78 billion.

Net income was up marginally to $155.8 million.

SRI's tire business unit reported nine-month operating income of $245 million — up 11.1% — on 1.9% higher sales of $4.92 billion.

The company attributed the sales revenue gain to higher OE and replacement market sales in the Japan domestic market as well as to sales gains in key overseas markets.

From a units-sold perspective, SRI's figures show declines in North American and Asian replacement sales but healthy gains in OE deliveries outside of Japan.