Yokohama Rubber earnings decline despite 'record' first quarter sales

Hiratsuka, Japan – Yokohama Rubber Co. (YRC) has reported a year-on-year decline in first quarter earnings (business profit) despite delivering record high sales for the first three months of the year.

The Japanese group posted a 3.2% decrease in earnings to Yen24.1 billion (€147 million), on 9% higher sales of Yen275 billion, YRC announced 15 May.

The group linked the decline in earnings to one-time costs related to the acquisition and consolidation of Goodyear’s OTR business during the quarter.

Otherwise, it said, profit from existing businesses was strong.

In Japan, YRC said business sentiment was “upbeat”, amid a steady recovery in inbound demand and increasing orders for construction and logistics projects.

These, it said, offset the weak demand by domestic households in response to rising prices of consumer goods.

In overseas markets, rising inflation concerns in the US weighed on consumer spending, despite a continued favourable personal income environment.

Meanwhile, YRC noted that the lingering effects of monetary tightening in recent years continue to weigh on demand in many industries, with the IT industry being one of the few exceptions.

In Europe, the group said, manufacturing industries are rebounding, and corporate business sentiment is improving.

Consumer sentiment, however, is being depressed by heightened uncertainty about the impact of trade policies announced by many countries.

In China, personal consumption was boosted by the annual spring festival holiday, but the high tariffs imposed by the US reduced China’s exports and created uncertainty about the future that is weakening industrial activity.

On the performance of business divisions, YRC said its tire segment, which includes commercial and off-highway tires (OHT), posted a 10.4% overall increase in sales to Yen250 billion. Segment earnings, meanwhile, fell 4.8% year-on-year to Yen22.2 billion.

OE tire sales revenue was higher than in the same period of the previous year, on strong sales in Japan and the expansion of shipments for Chinese ‘new energy’ car makers.

Replacement tire sales revenue also increased year on year, supported by higher sales of summer and winter tires in Japan and increased sales of high-inch tires in Europe.

The OHT sub-division posted a 10% increase in sales to Yen88 billion but earnings fell sharply by 60% to Yen3.8 billion, due to the Goodyear OTR acquisition..

The MB (multiple businesses) segment saw revenue fall 3.2% to Yen 23 billion but earnings rose 35% to Yen1.8 billion.

The segment’s hose & couplings business posted a year-on-year decline in revenue due to lower demand from construction machinery makers in Japan and car makers in North America.

However, sales of conveyor belts were “solid”, on strong orders from local major customers. Sales of aerospace products also remained strong.