Yokohama Income Declines in H1 2008

Yokohama Rubber has announced experiencing a 53.7 per cent decline in operating income for the six months to September 30, 2008 in comparison to the same period of the previous year, to 5.6 billion yen (£37.7 million), despite a 1.3 per cent increase in net sales, to 256.6 billion yen (1.7 billion). Net income for this first half of the current financial year declined 95.7 per cent, to 554 million yen (£3.7 million). For the three months ending September 30, 2008, net sales were 133.5 billion yen (£898.8 million), an increase of 1.8 per cent. Operating income decreased 81 per cent to 1.5 billion yen (£10.1 million) and net income dropped from 29.5 million yen (£198,600) in 2007 to a loss of 7.03 million yen (-£47,000) in the recently concluded quarter of this year.

Adversely affecting operating profitability were the continuing upward trend in raw material prices, the appreciation of the yen, and increases in logistics costs and other selling expenses. Those factors, says Yokohama, proved too large to offset fully through sales growth and cost-cutting measures. Further aggravating the effect of the decline in net earnings operating profitability was the partial relinquishment of a tax benefit associated with the write-down of unrealised gains on inventories.

Continuing sales growth in the company’s Tire Group offset a sales decline in the Multiple Business (diversified products) Group. Yokohama posted a 2.7 per cent increase in tyre sales over the same period of the previous year, to 193.8 billion yen (£1.3 billion). Contributing to this growth were increased sales to Japanese automakers; business gains in Russia, China, and the Middle East; and price increases. Operating income in the Tire Group declined 64.6 per cent, to 3.2 billion yen (£21.5 million), reflecting the upward trends in raw material prices, the appreciation of the yen, and growth in selling expenses.

Multiple Business Group sales declined 2.7 per cent, to 62.8 billion yen (£422.8 million). This decline occurred despite growth in high-pressure hoses for off-the-road equipment. Sales were especially weak in aerospace products, largely because of a decline in government business. Sales also declined in golf equipment. Operating income in the Multiple Business Group declined 8.3 per cent, to 2.7 billion yen (£18.2 million).

The yen’s stronger than anticipated appreciation and the sudden worsening of the global economic outlook have prompted downward revisions in Yokohama’s full-year fiscal projections. Company management now projects that net income will decline 54.9 per cent, to 9.5 billion yen (£64.0 million), on a decline of 21.5 per cent in operating income, to 26.0 billion yen (£175.0 million), and an increase of 1.0 per cent in net sales, to 557.0 billion yen (£3.7 billion). This revised projection for net income is 26.9 per cent lower than Yokohama projected in May, when it announced its business and financial results for the previous fiscal year. The projection for operating income is unchanged from the earlier projection, and the projection for net sales is 1.4 per cent lower.