The continuously escalating costs of raw materials dominated recent tire company earnings results, as both Yokohama Rubber Co. Ltd. and Toyo Tire & Rubber Co. Ltd. suffered declines in operating earnings for their fiscal years ended March 31.
Bridgestone Corp. experienced a similar decline in its first quarter, while Pirelli S.p.A.'s tire business bucked the trend with an increase in pre-tax profits in its first quarter. Titan International Inc. posted a quarterly profit for the first time in six quarters.
Toyo is counting on increased sales and cost-containment measures this year to help it rebuild profits eroded away last year by increased raw material costs and operating expenses.
For the year ended March 31, Toyo suffered a 43.3-percent drop in operating earnings, to $67.9 million, based on the aforementioned costs and foreign exchange losses. Sales edged up slightly to $2.26 billion, dropping the earnings/sales ratio two percentage points to 3 percent. Net earnings were up 51 percent to $48.8 million.
For fiscal 2005, Toyo is forecasting a 21-percent rebound in earnings and nearly 2-percent growth in sales despite continued increases in raw materials costs.
Toyo reported a 45.5-percent drop in tire division operating income, to $60.4 million, on 2.3-percent higher sales of $1.44 billion. Toyo is predicting 4.7-percent sales growth this year along with a nearly 4-percent improvement in operating income.
For the current fiscal year, Toyo has several initiatives under way to help it improve, including a tire plant in North America, increased production capacity at joint venture plants in China, efforts to enhance brand equity in Europe and renewed sales efforts in Japan.
Yokohama expects the continuing rise in raw materials prices and the high value of the yen to eat into earnings this coming year for a second consecutive year.
For fiscal 2005-the year ending March 31, 2005-Yokohama anticipates drops of 7.3 and 12.9 percent in ordinary and net income, respectively, while sales are forecast to rise 2.1 percent.
For the year ended March 31, 2004, Yokohama reported a 9.1-percent drop in operating income to $186.3 million on sales of $3.55 billion. Net income rose slightly, to $91.3 million, aided by a reduction in taxes by Japanese authorities.
Operating profits in the company's Tire Group fell 11.5 percent, to $135.1 million, while sales grew 0.6 percent, to $2.55 billion on the strength of exports to Europe, Asia and Oceania. Sales of original equipment tires increased from the previous year, while replacement sales were basically unchanged, the company said.
Better-than-expected overseas sales and a weakening of the yen/dollar exchange rate prompted Bridgestone to raise its first-half earnings projection.
For the six months ending June 30, Bridgestone expects an operating profit of around $774 million-a third higher than it predicted just three months ago-and sales of $10.7 billion, in line with its earlier forecast.
For the first quarter, the group posted operating earnings of $446 million on sales of $5.29 billion, amid ``favorable'' business conditions.
Bridgestone's tire business posted first-quarter operating income of $365 million on sales of $4.22 billion. Operating profitability was hit by ``the surging cost of raw materials,'' though sales strengthened on rising overseas demand, new product launches and vigorous marketing, the firm noted.
Bridgestone's sales in the Americas were $2.17 billion, as strong replacment market sales of passenger and light truck tires offset a sales decline in original equipment. Sales of truck and bus tires in the region grew strongly, the group added.
Operating income in the Americas of $72.9 million was affected negatively by surging raw material costs, the tire maker said. Comparisons with prior years is not possible as Bridgestone did not disclose quarterly results previously.
Pirelli expects its tire business to continue to report improved results this year following double-digit increases in operating income and sales in the first quarter.
Pirelli's tire unit reported operating income of $93.8 million in the three-month period ended March 31, up 13.6 percent from a year ago. Sales rose 12.5 percent, to $1.02 billion on an 11-percent increase in volume and improved pricing and product mix.
The unit's net profits were up 18.8 percent to $47.5 million.
Pirelli said it expects further improvements throughout the year because of growth in demand for high-performance tires in Europe, for truck tires in South America and overall growth in North America.
Off-highway tire and wheel maker Titan was $5.3 million in the black in the first quarter as demand picked up and the company's cost containment measures took hold.
The quarterly profit contrasts with a net loss of $5.9 million posted a year ago. The firm's operating income was $11.8 million-vs. a $1.7 million loss last year-and the most reported by Titan since the second quarter of 1998.
Sales in the quarter of $167 million were 29.4 percent ahead of the same period in 2003. Beginning in the second quarter, the operating results of Titan Europe P.L.C. won't be consolidated with those of Titan International Inc. The former Titan subsidiary was admitted to trading as a separate public company on London's AIM market on April 7.
Manufacturing efficiencies resulting from facility consolidations in 2003, the strengthening of the agricultural and light construction markets and the weak U.S. dollar compared with currencies in the United Kingdom, Europe and Japan contributed to the improved financial performance, Titan said.