KOBE, Japan — Sumitomo Rubber Industries Ltd. (SRI) suffered double-digit drops in operating and business profit for the year ended Dec. 31 despite 17.4% higher sales.
Operating income fell 69.5% to $114.2 million on revenue of $8.37 billion, cutting the operating ratio four points to 1.4%. Net earnings fell 68% to $71.6 million.
SRI cited higher freight and fixed costs and foreign currency exchange charges for the lower earnings. Higher selling prices essentially offset the negative effects of higher raw materials costs.
The company also stressed that the Japanese economy, while also expected to recover as the effects of COVID-19 subside, has witnessed "rising uncertainty," including trends in foreign exchange and prices. In addition, SRI noted it's been impacted by soaring freight costs, prices of raw materials and energy costs.
For fiscal 2023, SRI is forecasting earnings will rebound, essentially doubling the 2022 value, while sales revenue should grow about 9%.
SRI cautioned, however, that despite signs of recovery from the effects of COVID-19, there are concerns over economic growth, due to the geopolitical tension reflecting the situation in Ukraine, in addition to the high levels of inflation in certain regions and drastic interest rate hikes to appease such rise in prices.
In the tire business, business income fell 70.3% to $93 million on 18% higher sales of $7.16 billion, cutting the operating ratio to 1.3%, SRI said. The higher sales revenue was achieved despite 9% to 10% lower unit sales volume, SRI's data show.
SRI's tire business revenue in North America rose 23% to $1.63 billion, SRI's figures show, again despite lower unit sales volume. The company's documents show U.S. production grew about 1.5% this past year and is projected to increase close to 9% in 2023.