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November 12, 2018 01:00 AM

Sumitomo downgrades fiscal 2018 earnings outlook on rising costs

Tire Business Staff
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    KOBE, Japan — Sumitomo Rubber Industries Ltd. (SRI) has downgraded its earnings forecast for fiscal 2018 for a second time, after suffering a 25-percent drop in operating profit for the quarter ended Sept. 30.

    The latest forecast — which takes into account a projected 30-plus-percent decline in business profits in the fourth quarter — drops the operating income by 11 percent from the mid-August outlook to roughly $545 million.

    SRI cites rising raw materials — in particular crude oil and natural rubber — as well as fixed costs and eroding prices, and an unfavorable price/mix component as key factors in adjusting the fourth quarter outlook.

    For the quarter ended Sept. 30, SRI reported an operating profit of $60 million on marginally lower sales of $1.92 billion, yielding an operating ratio of 3.1 percent, down nearly two points from 2017.

    For the nine-month period, the operating profit was up 12.1 percent over the corresponding 2017 period to $306.2 million, based on a strong first-half performance. Sales for the three quarters rose 2.9 percent to $5.78 billion.

    Net income was up marginally to $155.8 million.

    SRI's tire business unit reported nine-month operating income of $245 million — up 11.1 percent — on 1.9-percent higher sales of $4.92 billion.

    The company attributed the sales revenue gain to higher OE and replacement market sales in the Japan domestic market as well as to sales gains in key overseas markets.

    From a units-sold perspective, SRI's figures show declines in North American and Asian replacement sales but healthy gains in OE deliveries outside of Japan.

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