KOBE, Japan—Sumitomo Rubber Industries Ltd.'s recent spate of investments in capacity—new plants in Brazil, Thailand and Turkey and the acquisition of the Dunlop assets throughout Africa—are part of the firm's Vision 2020 growth strategy that should see the firm's sales approach $15 billion by 2020.
Sumitomo President and CEO Ikuji Ikeda outlined the firm's plans—which supersede the company's 10-year plan unveiled in 2006—in the 2012 SRI annual report. SRI's Vision 2020 calls for the company to grow nearly 8.5 percent annually for the next eight years while achieving an operating income ratio of at least 12 percent. By comparison, the operating ratio last year was 8.9 percent and the five-year average is 7.1 percent. To achieve the firm's goals, management has established three initiatives aimed at driving growth: NEXT Market Expansion, NEXT Technology Revolution and NEXT Category Innovation.
To drive home to employees the significance of these initiatives, SRI has coined the slogan "Go for NEXT," which is expected to elicit excitement among the company's employees and investors.
In addition to the projects mentioned earlier—opening a car and light truck tire plant in Fazenda Rio Grande City, Brazil, creating a car/light truck tire JV in Çankiri, Turkey, building a farm tire plant in Amata City, Thailand, and acquiring a plant in Ladysmith, South Africa, along with the African Dunlop assets—Sumitomo is evaluating the feasibility of establishing production in Russia and India.
The possibility of manufacturing in India is tied directly to plans to expand the Falken brand, Mr. Ikeda wrote in the report. SRI does not have the marketing rights to the Dunlop brand in India; those belong to India's Ruia Group, which operates Dunlop India, Monotana Tyres and Falcon Tyres Ltd. In selecting Brazil, Turkey and perhaps Russia and India for new manufacturing capacity, SRI is trying to keep pace with demand growth from emerging markets, the company wrote in the annual report.
By 2020 SRI expects to be generating 20 percent of its annual tire sales from emerging markets other than China. SRI did not quantify its expected investment in new capacities through 2020. By comparison, Sumitomo has disclosed investments totaling $1 billion PLUS for the Brazil, China, Thailand and Turkey capacities and the South African acquisition.
The report does state SRI expects to have 18 overseas manufacturing locations by 2020, up from 11 currently, along with 31 national sales companies, up from 24. Another priority of Vision 2010 is to "ensure long-term sustainable returns" to shareholders, Mr. Ikeda wrote. Last year SRI bumped the year-end per-share dividend up nearly 54 percent to about 21 cents.
Along with expanding production capacities and broadening sales assets, SRI will accelerate its research and development/technology efforts under a "dantosu" (second to none) banner. In terms of tire performance, Mr. Ikeda wrote, this covers safety and reliability (including run-flat tires) along with environmental friendliness, the latter of which includes fuel efficiency and increased use of alternative, (fossil-fuel-free) raw materials, including those based on biomass.
Parallel to that, SRI will expand its overseas bases for tire and material development to be more in line with local customer needs.
Along with this SRI sees significant growth potential in increasing its OE presence with car makers outside of Japan. Its goal is to expand the offshore share of OE deliveries to 35 percent from 5 percent.
What issue concerns you most heading into 2019?
|The threat of more tariffs.||
27% (27 votes)
|The new Congress in Washington.||
35% (35 votes)
|Price fluctuations for the products we sell.||
10% (10 votes)
|More disruptions across the industry.||
29% (29 votes)
|Total votes: 101|