Kumho Tire’s 2006 Profit Suffers – Material Costs and Strong Won to Blame

South Korea’s second largest tyremaker, Kumho Tire Co., has released news that its net profit declined significantly during 2006 due to higher raw material prices and a firmer South Korean won. Kumho Tire earned 1.09 billion won (£600,000) in net profit last year, compared with a profit of 98 billion (£54.5 million)won from the same period a year ago, the company said in a regulatory filing.

Operating profit also plunged 52.5 percent from a year ago to 80.3 billion won (£44.7 million). Sales gained 2.7 percent to 1.81 trillion won, the company said. Losses incurred at the company’s new plant in Changshun were not anticipated by previous guidance, therefore this may lead to a faster than expected turnaround in equity method losses at the plant in 2007.

Kumho are anticipating operating profit margin to improve to 5.8 per cent during 2007, up from 4.4 per cent in 2006. The major factors for a confident outlook on profit margin are increasing merchandise sales from Chinese subsidiaries plus a slight decline in labour costs due to the retirement of long-time workers.