SRI revises fiscal '23 outlook up on strong Q3 results

KOBE, Japan — Sumitomo Rubber Industries Ltd. (SRI) has revised upward its earnings forecast for fiscal 2023 based on increased profits through the first nine months of the year and an easing of raw materials price rises, an improvement of the sales mix by focusing on advanced tires and other factors.

Sumitomo now expects to report an operating profit of $333 million— up 12.2% over earlier forecasts — on revenue of $8.55 billion, up 0.9% over the earlier forecasts. The improved report would yield an operating ratio of 3.9%.

SRI said sales revenue for the fiscal year is expected to exceed the previously announced forecast due to an easing of the downward trend in automotive production volume due to the shortage of semiconductors, and the effect of foreign currency translation.

For the quarter ended Sept. 30, SRI reported 27.4% higher operating income for the quarter ended Sept. 30 on 7% higher revenue, as freight and energy costs fell compared with prior-year levels.

Operating income rose to $170.2 million on sales revenue of $2 billion, raising the operating ratio to 8.5%. Net income was up 21.8% to $131.5 million.

SRI's tire business generated $152.4 million in operating income during the quarter on 8% higher sales of $1.72 billion, for an operating ratio of 8.8%.

The Kobe-based tire maker's operating profit for the nine months ended Sept. 30 jumped 321.3% to $300.3 million on 8.9% higher revenue of $6.16 billion, yielding an operating ratio of 4.9%.

SRI's tire business reported a 9-fold increase in operating profit to $230.8 million on 9% higher sales of $5.23 billion, yielding a 4.4% operating profit.

Revenue from tires in North America rose 8.2% to $1.21 billion despite lower overall sales volume, which SRI attributed to reduced sales of lower-profit products. Sales of Falken-brand tires, on the other hand, exceeded the level of the same period of the previous fiscal year with strong sales of Wildpeak SUV/light truck tires.

During the nine months ended Sept. 30, the economic environment continued to recover despite the high levels of inflation in certain regions and drastic interest rate hikes to appease such rise in prices, the geopolitical tension reflecting the situations in Ukraine and Middle East, and economic stagnation in some regions, SRI said.

The company went on to caution that while the Japanese economy continued to recover gradually, there is a risk that slowing economies outside of Japan may depress the domestic business conditions, as well as risks associated with uncertain trends in foreign exchange, interest and prices.

For fiscal 2023, SRI is projecting its tire business will generate $375 million in operating income — up 4-fold over fiscal 2022 — on 8% higher sales of $7.32 billion in sales. Among the improvements is a projected 19% increase in tire output in North America, to 3,810 metric tons a month.