AKRON—The second half of 2013 is starting to shape up as a repeat of the first half—mixed sales and earnings results. The most optimistic forecast, from Group Michelin, is for “modest growth” in market demand—led by more meaningful expansion in the emerging markets—along with continued benefits from lower raw materials costs.
Bridgestone Corp. is projecting no-growth scenarios in Japan and North America, in terms of consumer replacement sales, with Europe dropping measurably and Asia/Pacific growing by double digits. The commercial scenario is a bit brighter, Bridgestone said, with growth in all areas except North America.
The firm sees roughly 18-percent higher sales for the full year, with 40-percent improved net income, based on slight unit sales improvements, an appreciating yen and reduced raw materials costs. Goodyear is looking at no-growth in the consumer and commercial replacement and commercial OE markets while consumer OE volumes should rise about 5 percent.
Continental A.G. is predicting a slow recovery of passenger car replacement tire sales, especially in Europe, while growth in the Asian markets and in North America will level off over the rest of the year. Pirelli & C. S.p.A. sees the emerging markets in Asia and Latin America continuing to grow at double-digit rates, but no to slow overall growth in the more mature European and North American markets, although demand for premium products should be above average. Pirelli is expecting its revenues to be on par with last year, despite higher unit sales volumes.
The company is projecting slightly higher growth in its commercial sector vs. the consumer business. Shifting currency exchange rates will eat into revenue growth, Pirelli said. Cooper Tire & Rubber Co., which is working through the process of being acquired by India's Apollo Tyres Ltd., expects demand to continue to be “sluggish” while long-term raw material prices are expected to trend higher with periods of volatility.
Yokohama Rubber Co. Ltd. revised downward by 3.2 percent its full-year sales projection to about $6.3 billion, but management is sticking with earlier forecasts of roughly 19 and 10 percent gains in operating and net income. Looking at the first half of 2013, sales increased for most of the major tire makers, but they also reported lower earnings.
While the bottom line benefitted from lower raw material costs, this gain was offset by lower volume sales and a less favorable price/product mix. Stronger sales in North America and Asia were offset by sluggish sales in other markets.
Bridgestone's net income jumped 55.5 percent to $1.23 billion as sales climbed 14.5 percent to $17.9 billion, with lower raw materials costs and foreign currency exchange gains playing key roles in the earnings improvements.
The Tokyo-based company's tire business unit's operating income surged 44.8 percent to $1.81 billion as sales increased 17 percent to $15.2 billion. Bridgestone attributed its sales gains to strong unit sales in both consumer and commercial sectors in North America and Asia/Pacific while consumer tire demand in Europe was unchanged as commercial demand increased. In Japan, replacement sales rose but OE volume was down.
Michelin's net income plunged 44.5 percent to $665.4 million in the first half on 5.1-percent lower sales, but the company is expecting “modest growth” in market demand in the second half along with more benefits from lower raw materials costs in the range of $460 million.
Michelin said consumer replacement demand in North America ended the first half unchanged from the first half of 2012; North American OE demand rose 4 percent; truck tire demand in North America was off 2 percent for the period. Michelin has budgeted $2.6 billion for capital improvements.
Goodyear's first-half sales dropped 8.8 percent to $9.75 billion, but net income more than doubled to $206 million from $88 million. The firm said sales were boosted by higher tire unit volumes, but were offset by lower revenue in tire-related business, lower price/mix and unfavorable foreign currency translation.
Goodyear said it had record operating income in North America and Asia-Pacific, but North American sales dropped 10.2 percent to $2.2 billion. Unit sales in North America slipped 3.9 percent to 14.8 million. The company forecasts a full-year segment operating income of about $1.5 billion, based on tire unit volumes on par with 2012.
Continental A.G.'s net income rose 13.8 percent to $1.5 billion on lower sales of $17.4 billion, but the company is sticking with its earlier forecasts for the full year of an adjusted pre-tax operating margin of more than 10 percent on slightly higher sales.
For the half year, Conti's tire business reported operating earnings down 2.6 percent to $1.06 billion on 1.6- percent lower sales of $6.09 billion. Conti's passenger and light truck tire OE sales increased from 2012, especially in Asia/Pacific and the Americas, while replacement market sales fell short of last year's levels. Commercial tire sales grew about 2 percent during the period, Conti said.
Conti continues to invest in its infrastructure and research and development, boosting spending in these areas by 4.4 and 9.7 percent, respectively, during the first half.
Sumitomo Rubber Industries Ltd.'s sales improved 3.6 percent to $3.62 billion but net income fell 5.7 percent to $162.1 million. SRI's tire division earnings slid 5.5 percent to $275.7 million on 3.4-percent better sales of $3.12 billion.
Pirelli's operating earnings slid 7.6 percent to $509.3 million as revenues grew 3.6 percent to $4.1 billion on 6.3-percent higher unit volumes.
Pirelli said its results “underscore a reduction in sales and results in Europe, offset by growth in other geographic areas and with marked signs of recovery in the second quarter compared with the first three months of the year.”
Hankook Tire Co. Ltd. reported 11.3-percent increase in operating income to $467.2 million on slightly lower sales of $3.11 billion. Hankook will be ramping up production with its new plants in Chongqing, China, and Cikarang, Indonesia, providing a more “flexible global supply network.”
The company said UHP tire demand grew in China and North America, where UHP tire sales rose 32 and 15 percent, respectively.
Yokohama's net income dropped 5.3 percent to $136 million as sales rose 0.3 percent to $2.82 billion, despite 0.6-percent lower tire division sales. Sales and earnings benefited from Yokohama's trimming costs and from the weakening of the yen, and earnings benefited from declining raw materials prices.
These positives were offset by a sharp decline in demand for OE tires in Japan, generally weak demand in overseas tire markets and escalating price competition in tire markets worldwide.
The firm's tire operations suffered a 17.2-percent drop in operating income to $145.5 million, and sales slipped 0.6 percent to $2.19 billion. Sales in North America rose 11.7 percent in the period to $663.2 million, but operating income from North American operations fell 39.4 percent to $27.6 million.
Cooper bolstered net earnings 24.9 percent to $91.6 million despite a 14.5-percent drop in sales to $1.746 billion for the first half.
During the second quarter, Cooper's results included $7 million in costs related to the company's pending merger with Apollo Tyres, which Cooper said included “increased accruals for stock-based liabilities of $3 million, reflecting the stock price appreciation following the acquisition announcement.”
In its half-year results, Toyo said both unit sales and revenue in North America were favorable due to rising demand for its high value-added tires, such as those for SUVs. Toyo is forecasting 25-percent growth in revenue from its North American operations this year, to roughly $1.4 billion.
Apollo Tyres reported double-digit growth in operating and net income for its fiscal first quarter ended June 30 on slightly higher sales. Net earnings were up 19.4 percent to $29.7 million as sales edged 0.8 percent to $571.7 million.
Apollo reported its European and South African operations registered 6- and 13-percent increases in revenue, the latter amid concerns of growing imports of tires from China.
Titan International Inc.'s net earning plunged 46.3 percent to $42.7 million while sales—aided by new revenue from acquisitions—climbed 27 percent to $1.17 billion. As a result of acquisitions, Titan expects record revenue in the second half of 2013.
For the first half, the tire maker's expenditures totaled $36.1 million, compared with $19 million for the 2012 period.