Analysts: Winter Tyres; Price Increases to Support Sumitomo Profitability
Following the publication of Sumitomo Rubber Industries’ nine-month 2010 results, financial analysts have observed that the firm was “hit by higher raw material prices,” which are said to have “shaved off” billions of yen of profitability. Nevertheless the company maintained its full-year earnings advice. Deutsche Bank analysts said they expect the company to outperform in the fourth quarter of this year off the back of winter tyre sales: “The key point is whether price rises/better product mix/higher volumes can offset the impact of raw materials prices, including natural rubber and yen/baht appreciation.”
Sumitomo Rubber Industries has production bases in Thailand and Indonesia and exports to US-dollar denominated regions, leading the Deutsche Bank analysts to say that it is necessary to monitor not only yen but also baht and rupiah: “For volume growth we highlight growing sales of Dunlop and Sumitomo brand tyres, and for product mix improvement the impact of environmentally friendly tires. The remaining shortfall will have to be made up by price hikes.”
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