Hankook Aims for Higher Margins

Hankook Tire Co has stated it is aiming to boost its operating profit margin to 9.4 per cent this year, up from last year’s 8.4 per cent, despite intense competition within the industry. In a company memo, Hankook CEO Cho Choong-Hwan said that although the company had been through a time of oversupply and rising raw material costs, “there are huge opportunities, however, for well positioned and competitive tyre manufacturers as natural rubber prices are stabilising, and consumption in Europe is beginning to recover.”

South Korea’s largest tyremaker reported that its operating profit in 2006 fell 24.3 per cent to 174.5 billion won (£96 million), with the price of natural rubber rising 52 per cent since 2005.

Net profit also declined 22 per cent to 166.8 billion won (£92 million), although revenue expanded 2.9 per cent to 2.08 trillion won (£1.15 billion).

Cho noted in the memo that natural rubber prices are expected to stabilise at between US$1,800 and US$1,900 this year.

He added that the company plans to continue to invest between 4 and 6 per cent of its revenue in marketing its products in a bid to build brand awareness. “It will be the Asian tyre manufacturers who have the most to gain, Korean and emerging Chinese companies in particular.”