Report: Cheng Shin, Kenda earnings to grow fast in 1Q 2012

Taiwan-based tyre makers including Cheng Shin Rubber Ind. Co. and Kenda Rubber Industrial Co., are expected to see substantial growth in earnings in the first quarter of 2012 due to declines in raw material prices, particularly natural rubber. Furthermore, according to Taiwan Economic News, the European sovereign debt crisis means tyre manufacturers have slashed inventories to get rid of the risk in the prices of stocked goods.

The Taiwanese newspaper quoted an unnamed industry insider as saying that natural rubber has seen a 30 per cent decline in selling prices over the past quarter. At present, the average selling price for natural rubber is quoted at 337 Singaporean cents, or NT$78, per kilogram, hitting the lowest level since the beginning of this year. As tyre makers usually keep two months of inventories, it is expected Cheng Shin and Kenda will soon see their high-price inventories run out and will use low-price materials to make higher earnings in the first quarter of 2012. 

According to Taiwan Economic News, institutional investors said Cheng Shin will largely benefit from the booming demand of China’s automobile aftermarket as it has stronger competing edge than rivals there. It is estimated Cheng Shin will see consolidated sales grow over 15 per cent year-on-year in 2012.