Bridgestone: Smaller OP Drop Than Expected

Tyre maker Bridgestone Corp. said on Tuesday first-half operating profit edged up despite higher raw materials prices, and it lifted its full-year forecasts citing robust sales of high-end products. The higher forecast was expected after Bridgestone said last month it would likely post a smaller drop in 2005 operating profit than first thought thanks to brisk demand for tyres that offer higher safety or help raise fuel economy.

Bridgestone has projected a sharp drop in operating profit for the 12 months to December despite bigger revenues as it faces higher costs of procuring steel cord, carbon black, synthetic and natural rubber and other materials.

The Tokyo-based company has been passing on some of those costs to customers through several price hikes outside Japan this year, but a renewed rise in natural rubber prices is set to keep the pressure on margins.

Rival Michelin, however, last week eked out a higher operating margin in the first half, beating expectations, thanks to a better mix of prices.

Bridgestone’s operating profit for the six months ended June 30 rose 0.1 percent from a year ago to 92.08 billion yen (£460.2 million), beating its forecast in May of 78 billion yen (£389.8 million) and an average estimate of 80.7 billion yen (£403.3 million) in a survey of six brokerages by Reuters Estimates.

Net profit jumped 94.5 percent to 101.71 billion yen (£508.3 million) mainly due to special pension-related gains. Sales rose 8.9 percent to 1.256 trillion yen (£6,277.2 million).

Bridgestone now expects operating profit to total 198 billion yen (£989.6 million) in the 12 months to December, instead of the 170 billion yen (£849.6 million) projected in February. That would represent a slight increase from 197.7 billion yen in 2004.

It lifted its net profit forecast to 163 billion yen (£814.6 million) from 140 billion yen.

The tyre maker also said it would spend 17.5 billion yen to expand the output capacity of its operations in Thailand.

The company said it would raise daily production capacity at its Chonburi plant, which makes truck and bus radial tyres, to 7,500 tyres by the first half of 2008.

To cope with this increase, the company said it would also expand a separate factory in Thailand for steel cord.