Doublestar suffers huge losses

Chinese tyremaker plus Aeolus and Linglong release 2022 performance forecast

At the end of January, three Chinese tyre companies released their 2022 performance forecasts, which show that Aeolus and Linglong are in profit, but reveal huge losses at Doublestar.

Doublestar predicted that the revenue in 2022 was between 3.8 billion yuan (about £460 million, €520 million) and 4.2 billion yuan (about £500 million, €570 million). In 2021, Doublestar’s revenue was 3.92 billion yuan (approximately £470 million, €540 million). The data for 2021 and 2022 showed that the tyre manufacturer’s revenue situation didn’t change significantly during these two years.

It is worth noting that, in the case of little difference in income, Doublestar further expanded its losses. In 2022, Doublestar was expected to lose between 540 million yuan (about £64.75 million, €73.73 million) and 670 million yuan (about £80.33 million, €91.48 million), which is close to double the loss of 320 million yuan (about £38.37 million, €43.69 million) in 2021. After deducting non-recurring gains and losses, the tyre company lost between 600 million yuan (approximately £71.94 million, €81.92 million) and 740 million yuan (£88.73 million, €100 million) in 2022.

Doublestar said that unfavourable factors during the reporting period included sharp fluctuations in raw material prices, long-term high shipping costs, conflicts between Russia and Ukraine, and interest rate hikes in the US dollar. The superposition of these unfavourable factors increased the cost of Doublestar, which eventually led to its loss.

Aeolus profitable

After preliminary calculations, Aeolus predicted that its net profit attributable to shareholders of listed companies in 2022 was between 70 million yuan (£8.39 million, €9.56 million) and 90 million yuan (approximately £10.79 million, €12.29 million). After deducting non-recurring gains and losses, the company’s net profit is between 40 million yuan (about £4.8 million, €5.46 million) and 60 million yuan (about £7.19 million, €8.19 million). These figures mean that Aeolus was profitable in 2022. Just before 2021, the tyre company lost more than 100 million yuan.

Aeolus said it further adjusted its product and market structure in 2022 and made innovations in marketing, technology and management. The proportion of products and markets with better profitability increased significantly, which helped improve Aeolus’s profitability.

Linglong’s net profit exceeded 200 million yuan

Linglong said the net profit ranged from 240 million yuan (approximately £28.78 million, €32.77 million) to 280 million yuan (£33.57 million, €38.23 million). It is reported that the lower gross profit margin impacted the tyre maker’s net profit in 2022. Linglong said that fluctuations in raw material prices troubled them. The price of primary raw materials, such as synthetic rubber and carbon black, rose sharply, leading to higher tyre production costs.

Meanwhile, China’s commercial vehicle market was sluggish in 2022, with a sharp decline in production and sales, affecting tyre manufacturers supporting OEMs. Similarly, the demand in the replacement tyre market has also shown a downward trend. Linglong said that China’s domestic epidemic control affected people’s travel and logistics transportation. And the vast fluctuations in sea freight costs affected the tyre manufacturer’s shipments to overseas customers.

In addition, Linglong has also been affected by repeated epidemics. The tyre company’s production bases temporarily suspended production to varying degrees, and the employees’ attendance rate declined, eventually limiting overall production capacity.