TOKYO — Bridgestone Corp. reported double-digit growth in both half-year sales and profits, despite increasing pressure on replacement tire markets.
Adjusted operating profit for the first six months grew 15.3% to $1.74 billion on 11.5% higher sales of $15.3 billion, yielding an operating ratio of 11.3%, roughly on par with the fiscal 2022 period, the company reported.
While overall profits were up, Bridgestone noted a number of issues that impacted earnings negatively, including lower production volumes ($295 million), "conversion costs" throughout its manufacturing network ($35 million and raw-materials costs ($34 million).
Net earnings grew 55.9% to $1.34 billion.
In spite of the positive developments during the first six months of the year, Bridgestone is sticking with the rather cautious fiscal 2023 forecast it published in February, in part due to projected tire market declines in the second half in North America and Europe.
Bridgestone's tires business posted growth in the first half across all three categories: passenger car/light truck; truck/bus; and specialty tires, including off-road, agricultural, mining and aircraft.
The passenger car/light truck segment delivered a 10.3% increase in adjusted operating profit to $874 million on 15% higher sales of $8.41 billion, yielding a 10.4% operating margin.
The truck/bus tire unit (which includes retreading) reported a 15.6% improvement in operating income to $351 million on 1.7% higher sales revenue of $3.76 billion, yielding an improved operating margin of 9.3%.
The specialty tire unit generated the strongest profit growth, up 25.7% to $496.3 million on 17.3% higher sales of $2.29 billion, delivering an operating margin of 21.7%.
Bridgestone's Diversified Products segment — chemical & industrial products, air springs, sports and cycling — saw 11% growth in profits on 11% higher sales of $1.11 billion. This business unit accounts for just 7.3% of Bridgestone's revenue, following a series of divestments and business closures over the past couple of years.
Geographically, Bridgestone reported higher sales in all regions, led by 14% growth in the Americas and Japan, to $7.5 billion and $4.5 billion, respectively.
Operating profits improved in the Americas and Japan, by 6% and 62%, respectively, while earnings in the Europe/Middle East/India/Africa unit dropped 62%, in large part due to the suspension of production in Russia.
In terms of demand, Bridgestone said OE tire markets were recovering compared with the year before, with the degree varying across different regions. In particular, demand for larger rim-diameter tires is expected to remain "resilient" as the impact of semiconductor chip shortages on automotive production eases.
In the replacement market, the group said demand declined in Europe and North America, primarily due to economic slowdowns. The Japanese group reported a "gradual recovery" in North America, with the trend set to continue during the second half of 2023.
"Sell-out" recovery is also expected in Europe in the second half, "but slower than initial assumptions," Bridgestone added. For "sell-in," Bridgestone said it had completed distribution inventory adjustments in North America, but an expected second-half recovery would be slower than previously assumed.
For the full year, the group will focus on premium tires, through expanding sales, market-share, mix and price-management of passenger car tires.
In the truck/bus tire segment, Bridgestone it would also focus on premium tires amid a "decline in new-tire sales." The firm also will focus on its retreading business in Americas and Japan, to contribute to the overall performance of the segment.