Barely a year removed from its recall and replacement problems, Bridgestone/Firestone is on the rebound.
The U.S. subsidiary of Bridgestone Corp. said it posted slightly higher sales for the first half of 2002 and a ``dramatic increase in profitability,'' propelling Tokyo-based Bridgestone to a 6-percent increase in consolidated net sales, to $9.15 billion, and net income of $205 million for the period.
For Bridgestone, this compares to a loss of $255 million in last year's first half when the tire maker took $573 million in extraordinary charges to cover costs associated with the recall of Firestone tires in North America and the scheduled closing of the Decatur, Ill., tire plant.
Sales last year were $8.56 billion, while ordinary income grew 78 percent over the same period last year, to $466 million primarily because of improved profitability at its U.S. unit.
``The company's current fiscal 2002 forecast calls for recurring (pre-tax) income of $1.14 billion, higher than the original forecast of $1.03 billion and our forecast of $1.032 billion,'' said a report issued by Morgan Stanley Equity Research, Japan. ``In our view, Bridgestone is an attractive investment even taking into account a stronger yen and higher natural rubber prices during the second half.''
As for Bridgestone/Firestone (BFS), operating income totaled $54 million in the half, compared with an operating loss of $75 million last year. Net income improved by $483 million over the prior year, resulting in a first half 2002 loss of $14 million.
``Although the company's performance is not yet where we ultimately want it to be, the numbers clearly show that we've stabilized the business and our comeback is well ahead of schedule,'' said Mike Gorey, BFS controller and vice president. ``We've been able to improve sales while cutting costs and improving efficiency. A lot of the credit goes to the hard work of our 51,000 employees and our loyal stores and dealers across the Americas.''
BFS said the better-than-expected financial report came, in part, from improved operating profitability resulting from restructuring measures that led to increased efficiency and lower costs. In general, the Nashville-based tire maker is operating its tire plants at about 100-percent capacity, the company said. This has led to a 7-percent increase in gross profit margins over the same period last year.
``Firestone brand sales have not declined as much as was feared due to deep-seated consumer support,'' the Morgan Stanley report said. ``In addition, last year's (Bridgestone) restructuring measures, such as closing the Decatur plant, have been successful.''
The company also reported stronger unit sales of truck and bus tires and noted that passenger and light truck tires sales also grew solidly. The company attributed this growth in passenger and light truck tire sales to improved replacement market sales of Bridgestone brand tires, a stabilized market for Firestone brand tires and the launch of several high profile, popular tire lines. The robust growth in the replacement market offset a unit sales decline in original equipment tires, the company said.
For the full year 2002, BFS has forecasted net sales of $7.6 billion, operating profit of $190 million and net income of $50 million. The positive 2002 net income forecast contrasts sharply with a loss of $1.67 billion in 2001.
``(Bridgestone) earnings are on the mend and approximately 700 recall-related lawsuits have been settled,'' Morgan Stanley's report said. ``There are positive signs for Bridgestone. For instance, U.S. tire sales have been stronger than expected. Bridgestone brand sales are up significantly, as anticipated.''