While Group Michelin, Bridgestone Corp. and Goodyear battle for market share around the globe and Continental A.G. seeks its fortunes in the integrated automotive supply business, Japan's Sumitomo Rubber Industries (SRI) Ltd. has quietly solidified its position as the No. 6 tire maker worldwide and is laying the foundation for solid growth throughout Asia by 2008.
SRI, which controls the Dunlop name throughout Asia, is steadily building capacity outside of Japan, to the point it expects to double its ex-Japan production capacity in the next three years. By 2008, the company said, as much as 28 percent of its 36,000 metric tons of monthly production capacity will be at plants outside Japan vs. 15 percent in 2004.
Last year SRI inaugurated production at a plant in Changshu/Jiangsu, China, and recently disclosed plans to build a plant in Thailand, its third factory outside Japan.
It also has set up sales subsidiaries in China and Indonesia, the latter of which will help Sumitomo achieve its target of a 10-percent market share in ASEAN-the Association of South East Asian Nations, which comprises Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. ASEAN counts 500 million inhabitants.
These changes should translate into 4- to 4.5-percent growth a year through 2008-to about $5 billion, SRI said in its 2004 annual report. At the same time, the firm wants to maintain an operating income/sales ratio of 10 percent or better and a net income/sales ratio of 5 percent or better. The company said it also aims to lift the shareholders' equity ratio, lower the debt-to-equity ratio to below 1 and build a more stable corporate foundation.
In fiscal 2004 the shareholders' equity and debt-to-equity ratios were 9.7 and 4.1 percent, respectively, as the firm chalked up its third consecutive year of record profits. The firm's sales last year grew 4.5 percent to $4.35 billion, with tire division sales rising 5.2 percent to $3.3 billion.
Sumitomo has considerable room to grow in Asia, which represents only about 5 percent of the firm's global sales, according to its financial reports. By contrast, North America-where the firm uses the Sumitomo and Falken brands-accounts for 11.1 percent, or $454.6 million, of Sumitomo's 2004 sales.
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By the numbers
* 2004 tire sales: $3.15 billion
* 2003 tire sales: $2.92 billion
* 2002 tire sales: $2.64 billion