SRI quadruples profit in 2023

Despite significant interest rate hikes, geopolitical tensions, inflation and economic stagnation in some regions, modest signs of global economic recovery appeared in 2023. Sumitomo Rubber Industries (SRI) reports experiencing notable improvements in the financial year ending 31 December 2023, including a “significant reduction” in freight costs compared with the prior year as well as a “lull in the soaring raw material and energy costs,” leading to significantly improved profitability.

Consequently, SRI realised a 7.2 per cent year-on-year increase in sales revenue, which reached ¥1,177,399 million (£6.2 billion). Business profit surged by 253.6 per cent to ¥77,670 million (£410.3 million), operating profit increased by 330.3 per cent, to ¥64,490 million (£340.9 million), and profit attributable to owners of the parent company rose by 293.5 per cent to ¥37,048 million (£195.7 million).

Tire Business

Sales revenue in SRI’s tyre business increased by 7.1 per cent year-on-year, reaching ¥1,006,381 million (£5.3 billion), while business profit jumped 416.4 per cent, to ¥63,572 million (£335.8 million).

Within the Japanese firm’s domestic original equipment market, recent sales surpassed the levels of the previous fiscal year, as car production constraints primarily caused by the global semiconductor shortage gradually eased in the latter half of the year. Conversely, in the domestic replacement market, sales declined slightly year-on-year as a result of sluggish third-quarter shipments. These were impacted by price increases in winter tyres from July, compounded by a milder winter season.

Overseas, original equipment sales remained steady with increased sales in Europe and the USA, albeit with declines in China and Indonesia. Meanwhile, in the overseas replacement market, sales in the Asia and Oceania region remained subdued due to weak market conditions, despite a rebound in China following the COVID-19-induced downturn. Sales in Indonesia and ASEAN countries declined due to deteriorating market conditions. In North America, sales volume dipped below the previous fiscal year’s level, partly due to strategic sales control of low-profit products, while flagship Falken tyre sales, driven by strong sales of the well-received Wildpeak series, exceeded expectations. South American sales remained steady year-on-year, aligning closely with planned targets, despite increased competition from imported products amid declining freight costs. However, in Europe, sales volume fell short of the previous fiscal year’s level due to sluggish tyre replacement rates and slowing consumer purchasing power exacerbated by prolonged inflation.

Overall, both sales revenue and business profit in the tyre business surpassed the levels of the previous fiscal year.

Other Businesses

Within SRI’s sports business, sales revenue increased 8.6 per cent increase from the previous fiscal year, reaching ¥126,647 million (£669.0 million), with business profit rising by 39.6 per cent, to ¥12,482 million. (£65.9 million) Strong performance in the golf goods market drove sales revenue growth, particularly in North America and South Korea, buoyed by the success of contracted golf players and the favourable reception of the 13th generation XXIO club launched in December 2023. Tennis goods market sales remained stable despite price increases, balancing out slight volume declines attributed to foreign exchange effects. Additionally, in the wellness business, sales revenue exceeded expectations due to price adjustments and the opening of new facilities.

Similarly, in the industrial and other products business, sales revenue increased by 5.3 per cent, to ¥44,371 million (£234.4 million), with a 135.8 per cent rise in business profit, to ¥1,603 million (£5.6 million). Strong sales of rubber parts for medical applications and infrastructure products drove revenue growth, although declines were noted in rubber parts for office equipment and daily life supplies due to production adjustments and subdued demand, respectively. Nonetheless, both segments surpassed the previous fiscal year’s performance in terms of sales revenue and business profit.

Business forecast for 2024

Although inflation and interest rate hikes, as well as tensions in Ukraine and the Middle East, will continue to create uncertainty within the global economy, SRI anticipates a “modest recovery” within Japan’s economy in 2024. Yet while the company expects market prices for raw materials and energy costs to stabilise in fiscal 2024, it anticipates that its business will be subject to the impact of increased costs due to a surge in labour costs overseas.

Within this environment, SRI estimates that its sales revenue will rise 2.5 per cent year-on-year, to approximately ¥1,200,000 million (£6.3 billion), with business profit rising 102.0 per cent, to ¥80,0000 million (£422.6 million), operating profit up 78.5 per cent, to ¥61,000 million (£322.4 million), and profit attributable to owners of parent rising 186.7 per cent, to ¥31,000 million (£163.8 million).