Yokohama Rubber debuts mid-term management plan

Under its new Yokohama Transformation 2026 (YX2026 management plan), Yokohama Rubber intends to combat growing sales of budget consumer tyres with a strengthened focus on OE supply and also rapidly bring new and efficient plants online. Within the OHT segment, it will turn to mergers and acquisitions to bolster market share in specific areas. By fiscal 2026, the company aims for sales revenue of ¥1,150 billion (£6.1 billion), business profit of ¥130 billion (£688.9 million), a business profit margin of 11 per cent, and ROE of more than 10 per cent.

The Yokohama Rubber Co., Ltd. will implement YX2026 over the three-year period from 2024 to 2026, succeeding the Yokohama Transformation 2023 (YX2023) plan that steered the company’s course from 2021 to 2023. With YX2026, Yokohama Rubber is poised to further leverage the inherent strengths of its current ventures while exploring novel avenues for value creation, thus solidifying the transformation initiated under YX2023, all the while ensuring a legacy free of adverse impacts for future generations.

Guided by this ethos, Yokohama Rubber’s management will “resolutely” implement growth strategies for each business segment, with the overarching objective of realising ‘Hockey Stick Growth’ (see chart) throughout YX2026 and into fiscal 2027.

Throughout YX2026, Yokohama Rubber will pursue the following growth strategies in each business:

Consumer tyres

Low-cost, budget-focused tyre manufacturers have gained market share in recent years. In light of this trend, Yokohama Rubber will strive to enhance profitability in the consumer tyre segment by increasing the sales ratio for high-value-added tyres. These efforts will include seeking original equipment supply deals for premium cars, continued participation in motorsport events around the world, and tyre development tailored to the requirements of specific markets.

In addition, Yokohama Rubber’s consumer tyre business has initiated a programme it calls the ‘1-year plant’ challenge, which aims to bring new facilities online within one year and achieve the low cost and high efficiency needed to compete with emerging tyre makers and achieve the desired Hockey Stick Growth.

Commercial tyres

OHT business: Yokohama Rubber currently estimates the value of the global off-highway tyre (OHT) market to be approximately ¥4 trillion (£21.2 billion) and expects the market to grow by six per cent a year, a figure considerably higher than the projected two per cent annual growth for the consumer tyre market.

The tyre maker estimates that agriculture and forestry machinery tyres account for about 40 per cent of the global OHT market. The Yokohama Rubber Group plans to strengthen its “top share” in this market segment by implementing a multi-brand strategy that will leverage its production, sales, and technology strengths in all three segment tiers.

The Yokohama Rubber Group currently claims the second-largest share of the global tyre market for industrial and port-use machinery, a segment that accounts for about 25 per cent of the OHT market. During YX2026, it will further expand its Interfit tyre maintenance service, introducing this into new countries.

As for construction and mining machinery tyres, Yokohama Rubber considers its global share of these markets “as yet rather small”, and it thus will “consider pragmatic M&A” as a measure to increase this.

In addition to further increasing OHT production capacity, the entire Yokohama Rubber Group will “strengthen efforts to generate synergies” made possible by the May 2023 acquisition of Trelleborg Wheel Systems.

TBR business: The truck and bus tyre segment is another area where emerging tyre makers are expanding production capacity and seek to increase their supply to markets around the world. However, these efforts are being met by antidumping and countervailing duties in Europe and the United States. During YX2026, Yokohama Rubber will aim for profitable growth by strengthening sales in countries and regions where these measures support the “maintenance of appropriate pricing.”

MB business

Restructuring and profit improvement measures implemented during YX2023 have created a “new business platform” that, according to Yokohama Rubber, will “generate strong revenues” during YX2026. The company anticipates that the hose & couplings business will be a growth driver during YX2026, and Yokohama Rubber will restructure its value chain and North American production network in order to fulfil that role.

The industrial products business will solidify its leading share in Japan’s conveyor belt market and undertake internal reforms to establish a more stable high-profit structure in its marine hose operations. The MB Business as a whole aims to achieve a ten per cent business profit margin in fiscal 2026.

Technology & Production

The motto Yokohama Rubber will adhere to when implementing technology and production strategies during YX2026 is “low cost, speedy development of quality products.” These “quality products” are original equipment tyres for premium vehicles. In regard to “low cost,” Yokohama Rubber speaks of “drastically reduced costs that can’t be beat by other companies.” As for “speedy,” this “refers to the aforementioned 1-year plant challenge, which Yokohama Rubber calls the “centrepiece” of its consumer tyre strategy.

Sustainability

Yokohama Rubber intends to “give serious consideration” to environment-related investments that also contribute to corporate earnings during YX2026. One example is the new plan to reduce the Group’s 2019-level Scope 1 & 2 emissions of greenhouse gases by 30 per cent by 2026 and 40 per cent by 2030 while also reducing costs. Furthermore, to reduce Scope 3 emissions, Yokohama Rubber will promote greater use of sustainable materials and has targeted increasing its sustainable materials ratio to 28 per cent in 2026 and 30 per cent in 2030. However, during YX2026 it will consider raising the 2030 target to 40 per cent without incurring any cost increases.

Financial Strategy

To achieve the desired Hockey Stick Growth during YX2026, Yokohama Rubber will continue to “aggressively pursue” strategic investments. It will also continue unwinding cross-shareholdings as a measure to improve asset efficiency and will work to create a capital structure with an “optimal balance of debt and equity” that fits its business structure; the aim is an equity ratio of 50 per cent.

To raise the price-earnings ratio, the company will engage in more investor relations events and strive to lower the cost of capital while increasing the expected growth rate. It will achieve this through expanded information disclosures and fostering deeper engagement with investors. In terms of capital allocation for the YX2026 period, the plan entails earmarking approximately ¥320 billion (£1.7 billion) out of the anticipated ¥450 billion (£2.4 billion) increase in cash over three years for strategic investments and ongoing operational investments.

Lastly, concerning shareholder returns, Yokohama Rubber aims to steadily increase dividends in a stable manner, aligning with its fundamental policy of maintaining consistent dividends. This approach ensures the preservation of adequate internal reserves to support business development and reinforce financial stability, all while actively pursuing sustainable profit growth through continued investments.