SEOUL, South Korea — Hankook Tire & Technology Ltd. reported a 3.2% drop in pre-tax operating income for the quarter ended Sept. 30 on 4.4% higher sales, citing "weakened consumer confidence caused by the global economic downturn" for "intensified tire market sales competition."
For the quarter, operating income (EBITDA) fell to $150.6 million, or 9.8% of the $1.54 billion in sales recorded for the period.
For the nine-month period, operating income fell 9.7% to $764 million on 0.6% higher sales of $4.48 billion, dropping the earnings ratio nearly two full points to 17.1%. Hankook noted in its comments that the slowing global demand also affected the supply of OE tires and the demand for replacement tires in major markets.
Revenue in North America increased 1% in the quarter to $428.3 million with foreign exchange and price/mix components offsetting weak replacement and OE unit volumes, Hankook said. Sales for the January-February period were up 1.9% to $1.24 billion.
For the full year, Hankook said it expects revenues to be up about 3% over fiscal 2018 despite a drop in sales volume tied to the cooling Chinese and European auto markets "unfavorable" replacement market demand in Europe.
Margins are expected to be impacted negatively by higher fixed costs, which are offsetting lower raw materials costs, the company said.
On the plus side, Hankook said sales of larger tires (over 17 inches rim diameter) — grew steadily in major markets in South Korea, Europe, North America and China. They now account for 55% of its passenger tire revenue.
The company continues to reinforce its line-up for larger tires, following the growing demand trend in the global SUV market. Among recently disclosed new OE fitments are for the third-generation Porsche Cayenne SUV, Audi Q8 and 2020 Ford Explorer.
Going forward, Hankook Tire said it plans to "focus its capabilities on enhancing its brand image by strengthening its competitiveness in premium products, especially segments with high growth potential."
In addition, the company is planning to diversify its OE portfolio to build a "stable growth structure" and optimize distribution strategies for different regions abroad.