KOBE, Japan (March 2, 2015) — Sumitomo Rubber Industries Ltd. (SRI) reported 11.9-percent better operating income last year on the combined effects of lower raw materials costs and improved volumes and product mix, but management sees a slowdown in earnings growth in fiscal 2015.
Sales grew 7.3 percent in what Sumitomo described as a weak global economy that resulted in stagnant demand, leading to “intensified competition” in tire sales.
Operating income rose to $815.7 million on sales of $7.92 billion, yielding an improved operating margin of 10.3 percent. Sumitomo noted that tighter pricing more than offset the gains from lower raw materials costs — $29.3 million vs. $25.1 million.
Net income was up 18.8 percent to $502.8 million.
SRI's tire business reported operating earnings of $741 million, a 12.2-percent improvement, on 7.4-percent higher sales of $6.91 billion. SRI said it registered improved sales in nearly all areas of business, both domestic and overseas, although it singled out China and Russia as areas where it faced “intensifying competition.”
Sales in North America were up 2.6 percent to $865.2 million, while sales in SRI's “other” geographic segment jumped 27.8 percent, or $242 million, to $1.11 billion, reflecting the first-time inclusion of revenue from the African/Middle East operations acquired in late 2013 from India's Apollo Tyres Ltd. and the start of production in Brazil.
Sumitomo subsequently announced a $100 million investment through 2017 to expand capacity at its plant in Ladysmith, South Africa, including an upgrade for high-performance tires.
Longer term, SRI noted it continues to push initiatives supporting its “Vision 2020” — Sales of more than $11 billion and an operating income ratio of 12 percent or greater.
Some of the initiatives SRI has in the works to help it achieve its Vision 2020 goals are:
- Continuing research into rolling resistance and more product launches in the Dunlop “Enasave” and Goodyear “Efficient Grip Eco” fuel-efficient ranges;
- Expanding geographic sales efforts, especially into emerging markets;
- Expanding the run-flat product range to include the Falken brand; and
- Expanding production capacity, with new plants in Brazil, Thailand and Turkey and the expansion/modernization of the recently acquired factory in South Africa.
Sumitomo did not at this time comment on the status of Goodyear's efforts to dissolve the 16-year-old global business alliance with Sumitomo. The case went to the International Chamber of Commerce a year ago, but neither company has commented publicly on progress of arbitration talks there.
