Kobe, Japan – Sumitomo Rubber Industries Ltd registered double-digit drops in operating and net income for fiscal 2019 and is projecting only a slight rebound in 2020 because of global "economic uncertainty."
Fiscal 2019 operating profit fell 42.1% to $304.2 million (€273 million) and profit attributable to owners of parent decreased 66.7% to $111.1 million on 0.1% lower sales of $8.22 billion.
SRI attributed the earnings drop to foreign currency exchange losses, the effects of "intensified" competition throughout the industry and one-time charges related to the "impairment loss of goodwill and tangible assets."
SRI said it opted for the impairment loss because of a "delay of productivity improvement" in its tire business in North America and South Africa and in the industrial products business in Switzerland.
As a result, the operating ratio fell 2.5 points to 3.7%. For 2020, SRI is forecasting a slight rebound in operating income and sales, based on the expectation that the global "economic uncertainty" will continue and even increase despite of the US-China trade issues, a slowing Chinese economy and Brexit.
For 2019, the company's tire business reported a 9.8% drop in business profit to $424.9 million of 0.1% percent lower sales revenue of $7.06 billion. SRI cited increased fixed costs and expenses and the negative effects of foreign exchange rate changes for the earnings decline.
In overseas markets, SRI noted OE-related sales were up due to additional OE fitments in Europe, North America and emerging countries.
Overseas replacement market business (Falken brand, principally) grew steadily in North America, Europe and Africa.
Domestically, replacement market revenue fell due largely to the effects of a warm 2018-19 winter season, SRI said, while OE sales rose due to new fitments, particularly those for fuel-efficient tires.
Viewed regionally, North America outperformed other overseas market, SRI's figures show, as revenue increased 4.8% to $1.44 billion in the US, Canada and Mexico.
Sales in Europe and Asia/Pacific slipped 0.5% and 4%, respectively.