AKRON — For all but a handful of the world's leading tire makers, the first six months of 2019 has been a challenging period that has resulted in nearly universal reductions in earnings and lackluster sales growth.
Citing slowing global sales of new cars, fluctuating raw materials costs and economic uncertainties related to the growing global trade barriers, a growing number of the world's major tire makers are scaling back or even downgrading their earnings expectations for the rest of 2019.
With the exception of Group Michelin — whose figures are skewed by the first-time inclusions of major acquisitions of the past 12 to 15 months — the top dozen or so globally active tire producers reported lower operating earnings for the six months ended June 30 and more than half of these reported unchanged or lower sales.
- This article appears in the Sept. 2 print edition of Tire Business, as part of the 2019 Global Tire Report.
Based on lower-than-expected first-half financial results and second-half uncertainties, Bridgestone Corp., Continental A.G., Nokian Tyres P.L.C., Pirelli & C. S.p.A., Sumitomo Rubber Industries Ltd. (SRI), Toyo Tire Corp. and Titan International Inc. all downgraded their earnings outlooks for the year.
Bridgestone scaled back its full-year projection for operating income and sales by 8.5% to $3.4 billion and 1.9% to $27.8 billion, respectively. Both are lower than the fiscal 2018 results.
Continental told shareholders its adjusted pre-tax operating (EBIT) margin for the full year is expected to be around 7% to 7.5%, down from 8% to 9% in its earlier forecast, while the sales forecast for the year has now been lowered to $49 billion to $50 billion from $49 billion to $52 billion.
Explaining the adjustment, the company said it expects global vehicle production to decline around 5% for the full year.
Sumitomo said it is sticking with its fiscal 2019 forecast made in early May, but at that time it already had predicted its operating income would fall 5.5% short of fiscal 2018 on 2.9% higher sales.
SRI noted that the U.S. economy continued to recover steadily and the European economy remained on a gradual recovery trend, however, issues such as a gradual economic slowdown in China and a potential downside risk to the economy depending on situations over trade issues has deepened the uncertainty in the outlook.
Pirelli scaled back its earnings expectations slightly to a range of 18% to 19% for the EBIT ratio, down from 19%-plus. Revenue growth was halved to 1.5% to 2.5% from 3% to 4%.
Titan adjusted its earnings outlook for fiscal 2019 down measurably — to between $75 million and $90 million for the year, down from $119 million — after reporting operating losses in the first half.
For its part Michelin said it expects earnings and sales improvements this year, but again these are largely influenced by its acquisitions of Camso Ltd., Fenner P.L.C. and P.T. Multistrada and other factors distinctive to Michelin.
Despite reporting lower operating income in the half year, Goodyear and Cooper Tire & Rubber Co. both said they expect to report an improved operating profit margin throughout the year.
In Cooper's case, it said it expects to match or exceed the 5.9% reported last year despite headwinds such as increased U.S. tariff costs (which impact Cooper's medium truck tires), the delayed timing of anticipated commercial truck tire price increases, and weakness in the China new vehicle and Europe replacement tire markets.