Sumitomo Rubber exceeds mid-term targets, turns North America profitable

Kobe, Japan – Sumitomo Rubber Industries (SRI) has exceeded the 2023 targets set out in its four-year mid-term plan (2023-2027), as it continues to focus on profit improvement and cash generation.

For 2023, the Japanese group achieved a business profit rate of 6.6%, significantly higher than the initial target of 2.9% envisaged for the year.

Rate of invested capital (ROIC) stood at 5.7%, compared to the target of 2.6% initially planned, SRI announced 14 Feb.

By 2027, the group targets to achieve business profit rate of 7% and ROIC of 6%, said SRI in its latest update.

According to the Kobe-based group, during 2023, business in North America turned profitable, “making more progress than initially planned.”

SRI linked the performance to the strong sales of Falken tires in North America, as well as “external factors” such as lower ocean freight costs, which improved the profitability of imported products.

The group said it would continue to focus on North America profitability, and would “consider all options while working on further improvement.”

Among other measures, SRI said it aimed to improve the profitability of its imported products into North America.

An ongoing expansion programme at SRI’s production facility in New York will also help achieve further profitability.

The group said it was “halfway through” the expansion project, which as previously announced, aims to nearly double the capacity at the plant in Tonowanda, New York, by end of this year (ERJ report). 

Other initiatives to enhance profitability will include structural reforms across 10 non-tire businesses, of which two – gas hose business in Japan and medical rubber parts unit in Switzerland – have already been divested.

SRI expects to complete the divestment of four more businesses in 2024, and the remaining four by the ‘turning point year of 2025’.

The move will enable the group to shift resources to businesses where growth is expected.

In the tire segment, SRI said it will focus on new technology and improved efficiency to increase profits.

As part of this, the group aims to commercialise its sensorless ‘sensing core’ technology this year.

The “fully-fledged business” will aim to achieve business profit of Yen10.0 billion (€61 million) or more by 2030.

To that end, SRI will develop total vehicle failure prediction solutions through its strategic partnership with Viaduct. (ERJ report).

Furthermore, the group’s sensing core technology has been adopted in a proof-of-concept project for a smart city in China.

SRI's 'sensing core' technology analyses wheel-speed signals – generated by tire rotation – to detect information such as road conditions and tire load.

Other areas to work on will include the use Japan’s NanoTerasu soft x-ray facility to accelerate research on sustaining performance of rubber (ERJ report) as well as investment in tire aerodynamic simulation for developing next-generation EV tires (ERJ report).