Hankook Profits Down 45% in Third Quarter

Third quarter sales grew 24 per cent year on year at Hankook Tire, the company’s latest figures reveal. However, as has been the case with so many companies in this second half of 2008, increased sales have not translated into a better bottom line.

Sales for the three-month period amounted to KRW 1,139.6 (£567.2 million), up from KRW 919.3 (£457.6 million) in the corresponding quarter of 2007. Hankook reports that, for the third consecutive quarter this year, sales have been driving by year-on-year gains in the profitable UHP tyre business of more than 40 per cent. The company adds that this is also the third consecutive quarter in which sales have exceeded US$1 billion, an achievement the company had not reached prior to 2008.

Operating profit, at KRW 42.6 billion (£21.2 million), experienced a drop of 45.2 per cent year-on-year. On reporting this result, Hankook quoted fluctuating currency rates and raw material costs as causal factors; the South Korean manufacturer claims that raw material costs have increased 34.8 per cent year-on-year. Specifically, the cost of natural and synthetic rubber increased by 30.9 per cent and 72.9 per cent year-on-year, respectively.

“Hankook Tire should continue to focus on what has been differentiating and fuelling our consistent double-digit growth over the last several years: the quality of our tyres and the technology behind them,” said Seung Hwa Suh, global CEO of Hankook Tire. “Expects and consumers are showing increasing trust and recognition of our tyres as evidenced by tyre test results in Europe and our ongoing success in winning new customers and gaining market share. There are great opportunities for Hankook Tire to emerge strongly from this current period of economic pressure on all tyre makers.”

In spite of challenging market conditions, Hankook Tire states that its year-on-year sales performance remains strong throughout key regions and within key business units. Sales within the UHP business alone accounted for KRW110.4 billion (£55.0 million), and UHP tyre exports from Korea increased by 26.3 per cent year-on-year (based on FOB price). The North America market saw sales increase by 37 per cent while Europe continued to grow by 14 per cent. Sales to Latin America, Asia Pacific, Africa and the Middle East markets increased by 55 per cent, while sales to growing markets in Europe such as Russia increased by 158 per cent.