Fukoku profits fall on higher materials, labour, energy costs

Tokyo — Fukoku Co. Ltd has reported lower profits for the fiscal year ended 31 March, as rising raw material and labour costs outweighed productivity improvements and pricing measures across several business segments.

Full-year sales increased 0.4% year-on-year to Yen90 billion (€487 million), supported by “steady sales” in the ‘functional parts’, ‘life science’ and ‘hose’ businesses.

Operating profit declined 19.4% to Yen3.8 billion, which the company said reflected rising raw material, labour and other costs.

Efforts related to improving productivity, streamlining, and pricing “proved insufficient” to offset the cost increases, said Fukoku in a 15 May statement.

In the functional parts business, which includes heavy duty industrial rubber parts, weatherstrips as well as office automation rubber goods, sales increased 3.7% to Yen42.9 billion.

The gains were mainly driven by strong orders for thermally conductive gap fillers and products supplied to local wiper manufacturers in China.

Segment income, however, declined 7.2% to Yen4.6 billion as higher raw material and labour costs outweighed gains from higher sales, productivity improvements and price increases.

The ‘anti-vibration parts’ business posted a 0.8% decline in sales to Yen37.8 billion as domestic and overseas orders remained weak. Segment income fell 6.0% year on year to Yen2.7 billion.

Fukoku said “productivity improvements, streamlining, and price increases proved unable to fully mitigate” higher metal parts and labour costs.

Segment results were also impacted by the prior-year accounting reversal tied to subsidiary misconduct.

The ‘hose’ business was one of the stronger-performing units during the year, with sales up 10.4% year-on-year to Yen5.3 billion, driven mainly by “strong orders for products for commercial vehicle use.”

Segment income more than doubled, rising 104.6% to Yen420 million, supported by higher sales as well as “productivity improvements achieved through automation, streamlining, and price increases.”

On a non-consolidated basis, Fukoku’s net sales increased 0.8% to Yen35.735 billion.

The company posted an operating loss of Yen701 million, compared with operating income of Yen89 million in the previous year, citing higher raw material and labour costs and increased SG&A expenses linked to “strategic DX investments.”

On the business environment of the year, the Japanese rubber products supplier said the domestic Japanese economy “maintained a course of moderate recovery” during the fiscal year, supported by improved employment conditions and government measures.

However, the company warned that “rising geopolitical risks and fluctuations in the cost of energy and raw materials associated with rising tensions and instability in the Middle East” continued to cloud the outlook.

Furthermore, Fukoku noted that the “downside economic risks of US trade policies and continuing inflation” as well as different automotive trends globally, weighed on the short-term outlook.

While vehicle production expanded in China and remained stable in Japan, “there are signs of slowing in certain Southeast Asian markets,” said the automotive parts supplier.

Demand for electric vehicles, meanwhile, has entered “a readjustment phase due to policy changes and other factors,” despite expected long-term growth.