Bridgestone hit by slowing replacement demand in Europe, N America

Tokyo – Bridgestone Corp. has seen an 8.6% year-on-year decline in third quarter earnings (adjusted operating profit), to Yen124.0 billion (€764 million), on sales 0.5% higher at Yen1,096 billion.

The performance was linked to a significant decline in replacement passenger car tire and truck & bus tire markets compared to the prior-year third quarter.

Recovery for truck & bus tire markets in North America and Europe was slower than the group had forecast in August, Bridgestone noted 9 Nov.

Indeed, the latter region confirmed earlier concerns about "prolonged downturn in economy & demand becoming apparent in the European market."

In OE markets, meanwhile, Bridgestone said the third quarter had shown a continuing recovery in demand for passenger cars and truck & bus tires.

For the nine months to 30 Sept, Bridgestone posted a 7.4% year-on-year increase in sales to Yen3,198 billion, with adjusted operating profit up 5.9% at Yen375.8 billion.

The year-to-date higher revenue was achieved through “strategic price management, sales expansion & improvement of sales mix of premium passenger car tires.”

Furthermore, increased revenue from off-road tires as well as tailwind effect from currency exchange helped push up sales.

Bridgestone linked the nine-month earnings gains to improved price/mix, which helped offset negative impacts of raw materials costs and inflation.

“Expense management and onsite productivity improvement” also helped offset the effects of lower volumes.

Overall, for the first three quarters of the month, Bridgestone, saw margins decline by 0.2 percentage points to 11.3%.

The Japanese group went on to state that it was accelerating efforts to “further improve business quality”.

Breaking down the segments, Bridgestone said passenger car and light vehicle tire segment delivered 4% earnings growth to Yen188 billion.

The increase was achieved on 11% year-on-year higher sales of Yen1,750 billion in the first nine months of 2023.

Earnings, however, fell 11% year-on-year in the truck & bus tire segment to Yen60 billion, on 2% lower sales of Yen766 billion.

Here, Americas reported a 9% year-on-year decline in earnings to Yen171 billion, on 9% higher sales of Yen1,570 billion.

Meanwhile, Europe saw earnings plummet by 69% year-on-year to Yen18.2 billion, on 5% higher sales of Yen675 billion.

Speciality tires, including off-road, farm, aviation and motorcycle tires, reported a 21% increase in earnings to Yen103 billion, on 12% higher revenue of Yen463 billion.

The non-tire diversified business delivered the strongest earnings growth of 42% to Yen20 billion and sales improvement of 9% to Yen222.5 billion.

Looking forward, Bridgestone said it expected fourth quarter costs to increase year-on-year due to increasing energy, labour and other costs from suppliers.

Feedstock pricing, meanwhile, is anticipated to “continue to fall” compared to last year, the Tokyo-based group added.

In terms of demand, Bridgestone said the OE recovery following an improvement in the semiconductors supply is expected to continue throughout the year.

In the replacement market, Bridgestone said it expected an ‘overall recovery’ for the truck & bus tire segment, although at a slower pace than its February and August guidance.

Bridgestone predicted that demand would “fall short from February guidance and prior year” for truck & bus tires, while remaining flat for other tire segments.

The group has maintained its overall financial forecast announced in February.