Earnings Down Sharply at Yokohama Rubber

Yokohama Rubber has released its results for the first three quarters of the current financial year, and the company has joined the growing list of firms whose income has been severely curtailed in recent months. Operating income to December 31, 2008 declined 43.8 per cent from the same period of the previous year, to 17.3 billion yen (£134.19 million), on a 0.2 per cent increase in net sales, to 410.6 billion yen (£3.18 billion). Net income declined a whopping 99.1 per cent, to 222 million yen (£1.72 million).

Sales growth in Yokohama’s Tire Group offset a decline in the Multiple (diversified) Business Group, the company reports. Operating profitability suffered from the rise in raw material costs during most of the nine-month period, from the appreciation of the yen, and from the sharp decline in demand for tyres and hoses, which undermined productivity in those product sectors. Net income reflected the downturn in operating profitability, the effect of the strengthening yen on foreign currency–denominated sales receivables and on debt liabilities at overseas subsidiaries, and the partial relinquishment of a tax benefit associated with the write-down of unrealised gains on inventories.

Yokohama’s Tire Group posted a 2.2 per cent increase in sales over the same period of the previous year, to 319.4 billion yen (£2.48 million), though operating income in the group declined 44.6 per cent, to 14.2 billion yen (£110.14 million). The sales growth in tyres benefited from growth in sales to automakers in Japan during the nine-month period and from overall growth in overseas business. Those gains more than offset the adverse effect of the precipitous decline in demand that began in October 2008. The decline in operating profitability in the Tire Group resulted from the upward trend in raw material prices, the appreciation of the yen, and an increase in selling expenses, which resulted from expanded unit sales volume.

Management at Yokohama is projecting declines in sales and earnings for the full fiscal year to March 31, 2009. It projects that net sales will decline 5.2 per cent from the previous year, 523.0 billion yen (£4.06 billion); that operating income will decline 57.7 per cent, to 14.0 billion yen (£108.59 million); and that the company will post a net loss of 7.0 billion yen (£54.30 million), compared with net income of 21.1 billion yen in the previous year (£163.66 million). In response to the deteriorating business environment, Yokohama says it will continue working to trim costs, to reduce expenses, to curtail investment, and to pare inventories. The company announced on February 12 that it is taking the additional measures of lowering directors’ compensation by 10 per cent and all other management-level personnel’s compensation by 5 per cent.