Sumitomo Rubber sales, earnings down on lower volumes, higher costs

Kobe, Japan – Sumitomo Rubber Industries (SRI) has reported a significant decline in first quarter earnings, due mainly to lower volumes and higher cost of raw materials.

Business profit (earnings) for the three months to end of March fell 39% year-on-year to Yen14.1 billion (€87 million) , on 1.2% lower consolidated sales of Yen287.7 billion, SRI reported 15 May.

During the period, SRI said, tire volumes declined due to market stagnation caused by inflation as well as other factors such as the discontinuation of some-low profit products.

In addition, the higher cost of raw materials for tire production impacted first quarter earnings.

On the market environment, SRI said it saw recovery in demand over the past 12 months although some regions are at a “standstill” due to uncertainties surrounding the US tariffs.

The Japanese economy, according to SRI, is recovering steadily with employment and income environment improving.

However, the group noted that consumer sentiment was weakening and there was a risk of economic downturn due to US tariff policies.

Breaking down the performance of segments, SRI said its tire business reported a marginal 0.2% increase in sales for the three-month period to Yen244.5 billion.

However, earnings for the division fell 40.2% year-on-year to Yen11 billion, on higher costs, including those associated to its plant closure in the US.

In the domestic Japanese OE market, SRI noted that volumes were higher year-on-year, due to the previous year’s product cutbacks by major car makers.

Japanese replacement demand, however, declined despite ‘significantly higher’ sales of winter tires during the snowy winter in the country.

SRI linked the decrease to slightly lower summer tire volumes as well as ‘declining order receipt for offtake products’.

In the overseas OE market, SRI posted “a significant drop” in volumes, due to lower automotive production in Asia, particularly China.

Overseas replacement market saw most regions posting a decline in demand, while sales volume in Asia-Oceania grew year-on-year, helped by a recovery in Indonesia.

Volumes in China remained at “a low level” due to market stagnation, while Europe posted a slight decline due to inflation and market downturn.

In North America, despite higher volumes for its flagship Wildpeak series, SRI posted lower volumes due to the import of low-cost tires into the market.

In its sports business, SRI reported a year-on-year decline of 11.7% in first qurater sales to Yen32.4 billion, while earnings dropped sharply, 59% year-over-year, to Yen1.7 billion.

In the golf goods market, revenue fell year-on-year due to the significant impact of deteriorating market conditions in South Korea and despite increases in the Japanese and American markets.

In the tennis goods markets, SRI said sales were higher compared to last year, due to higher demand in major markets of Europe and Japan.

SRI’s industrial and other products business reported a 2.1% increase in first quarter sales to Yen10.7 billion, while earnings more than doubled to Yen1.5 billion.

The group linked the higher revenue to “robust sales for infrastructure products, vibration control dampers and rubber parts for office equipment.”

Medical rubber sales remained subdued due to the divestment of SRI’s European subsidiary last year.