Kumho Q1 Sales 18% Up Year-on-Year

During the opening quarter of the 2010 financial year, Kumho Tires posted sales of KRW 586.4 billion (₤343.8 million), representing 27.7 per cent quarter on quarter and 18 per cent year-on-year growth. Operating profit during the three months to March 31, 2010 amounted to KRW 21.3 billion (₤12.5 million) and net income KRW 20.9 billion (₤12.3 million). The tyre maker comments that these gains result from an improved plant operation rate and greater export sales. Export volume during the quarter was up 40 per cent year-on-year, an occurrence Kumho attributes the general recovery of North America’s car and tyre markets – one of its key sales territories.

“Furthermore, exports of UHP tyres to the world’s largest tyre market were up no less than 150 per cent,” states Kumho. “On the operations front, the company raised its production rate to 90 per cent – an impressive 30 per cent increase over the same period last year. This achievement was aided by the efforts made to maintain appropriate inventory levels since the appointment of the company’s CEO, Jong-Ho Kim in mid-2009.”

“The company’s return to profit is very encouraging for all its stakeholders,” said Ho Lee, Kumho Tires’ senior vice president of Strategic Planning. “The results are even more promising when one takes into account the fact that production could not meet demand due to prolonged collective bargaining and wage negotiations with the union. This, in turn, delayed the injection of much needed emergency funding.

“The positive effect of restructuring will become still more apparent in the second quarter as the company accelerates the recovery process required to complete the work-out programme it is currently undergoing,” he added.

The company’s second quarter forecast is based on the improved cost competitiveness expected to ensue from its recent agreement with its employees’ union in Korea that called for both wage cuts and increased productivity, along with a full order book resulting from increased demand for its tyres over the peak summer season. According to Kumho, the turnaround will be still further aided by significantly reduced interest charges once the company’s business normalisation plan, which includes debt to equity swaps by creditor institutions, is implemented as intended. In addition, the normalisation currently being undertaken by overseas subsidiaries will help Kumho reduce its equity method losses.

Kumho Tires requested a work-out programme at the end of last year, mainly as a result of liquidity shortages caused by the global economic slowdown and the accumulated deficit of recent years.