KOBE, Japan — Sumitomo Rubber Industries Ltd.'s operating income dropped 12.6 percent for the quarter ended March 31 as increased costs for raw materials ate into the margin.
Operating income fell to $104.1 million, while sales rose 7.7 percent to $1.69 billion, yielding an operating ratio of 6.2 percent, down from 7.6 percent a year ago. Increased materials' costs impacted earnings by more than $60 million.
Net earnings rose 4.9 percent to $75.3 million.
On a regional basis, SRI's sales revenue in North America jumped 28.6 percent to $288 million, an increase Kobe-based Sumitomo attributed to the region's continued economic expansion.
SRI's tire business suffered a 22.6-percent drop in operating income, to $114.4 million, on 8.1-percent higher sales of $1.35 billion. The operating ratio dropped two-plus points to 6.1 percent
In general, replacement sales in overseas tire markets grew despite sluggish consumption associated with political uncertainty in the Middle East. Sales volume increased in the United Kingdom stemming from the newly acquired Micheldever Group Ltd., a British tire sales company with annual sales of about $400 million.
In overseas OE markets, sales grew due to increased volumes in China, resulting from car tax reduction, and in Europe.
Based on the first quarter results, SRI management is forecasting 12-percent sales revenue growth for the fiscal year to roughly $7.5 billion. The operating profit, however, is expected to fall more than 30 percent shy of the 2016 figure, SRI said.