Yokohama Rubber sales and earnings down

Yokohama Rubber Co., Ltd. has reported a decline in its sales and earnings for the first three quarters of 2016. Profit attributable to owners of the parent declined 53.5 per cent year-on-year to 8.5 billion yen (£63.0 million). This results from a 38.0 per cent decline in operating income, to 18.9 billion yen (£140.1 million), on a 7.5 per cent decline in net sales, to 410.2 billion yen (£3.0 billion). Weaker demand and declining prices in Yokohama’s principal product sectors, together with the yen’s appreciation, were the main factors behind the lower sales and earnings.

Operating income in Yokohama’s tyre segment declined 25.8 per cent to 16.6 billion yen (£123.0 million), on an 11.0 per cent decline in sales, to 310.5 billion yen (£2.3 billion). Sales of original equipment tyres in Japan decreased due to a downturn in unit vehicle production and a reduction in tyre prices, however operating profitability increased thanks to the continuing decline in raw material prices. Both unit volume and sales decreased in the Japanese replacement market, however operating profitability increased.

Despite an overall increase in unit sales volume, sales and earnings outside Japan declined due to yen appreciation and escalating price competition. Contributing to the rise in unit sales volume were robust sales growth in North America, progress in developing new sales channels in Europe, and growth in shipments to vehicle manufacturers in China.

The company’s nine-month figures include the first-time inclusion of the fiscal results of Alliance Tire Group B.V., which Yokohama acquired in July 2016. Alliance Tire Group is included in consolidated accounts as of July; the business posted sales of 12.9 billion yen (£95.6 million) for the three months to September and an operating deficit of 2.8 billion yen (£20.8 million). Declining prices for grain undercut demand for agricultural equipment tyres, Alliance Tire Group’s main product sector, and price competition escalated in that sector. However Yokohama Rubber reports that thanks to vigorous marketing, the newly-acquired subsidiary succeeded in achieving Yokohama’s sales target. The operating deficit reflects acquisition expenses and the amortisation of goodwill.

Yokohama is holding to the full-year sales and earnings projections it announced in August 2016. These include a 44.9 per cent decline in profit attributable to owners of the parent, 20.0 billion yen (£148.2 million), on a 30.3 per cent decline in operating income, to 38.0 billion yen (£281.7 million), and a 4.7 per cent decline in net sales, to 600.0 billion yen (£4.4 billion). The acquisition of Alliance Tire Group has increased Yokohama’s fully-year projection for net sales by 27.0 billion yen (£200.1 million) and reduced its projection for operating income by 4.5 billion yen (£33.6 million). The downwardly revised operating income projection is the net result of a 4.7 billion yen contribution from Alliance Tire Group and acquisition-related expenses estimated before the merger as 9.2 billion yen. Yokohama Rubber’s management has declared an interim dividend of 26 yen per share and will propose a year-end dividend of the same amount per share.

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