KOBE, Japan — Sumitomo Rubber Industries Ltd. (SRI) suffered an operating loss of $12.3 million in the quarter ended June 30, which contributed to a 56% drop in operating income for the half year.
The second quarter operating loss came despite 16% higher sales of $2.02 billion. Sales for the first half were up 16.4% over the same period in 2021 at $4.16 billion, while the operating profit was 56% below the 2021 result, yielding an operating ratio of 2.5%, down four full points from 2021.
Sumitomo cited growing inflationary pressures, restrictions on economic activities in China and the negative effects of the war in Ukraine and the lingering impact of the COVID-19 pandemic for the second quarter operating loss.
Based on the first half performance and expected second-half headwinds, SRI downgraded its full fiscal year earnings forecast by nearly a third to roughly $228 million, which would be a 43% drop from the fiscal 2021 result. Sales are projected to be slightly above earlier forecasts, but if achieved would be 22% above the fiscal 2021 figure.
Among the headwinds SRI cited are the decline in automotive production volume due to the shortage of semiconductors, the impact of soaring freight costs and the rising prices of raw materials.
The tire business mirrored the parent company's performance, with an operating loss of $21.7 million in the quarter on 16% higher sales of $1.79 billion. For the six-month period, the tire business earnings dropped one-third from 2021 to $62.6 million on 16.7% higher sales of $3.5 billion .
Original equipment business was down both domestically and internationally, SRI said, mainly because of lower vehicle production by auto manufacturers due to the global shortage of semiconductors.
SRI's replacement market business rose in the domestic market and in Europe, but fell short of the 2021 comparative period in Asia/Oceania outside of Japan and in the Americas.
In the latter, however, SRI reported an improved product mix as a result of cutting back on the sales of low-profit products
Overall, SRI reported sales revenue in North America was up 28% to $825 million, putting the region nearly on par with Japan in terms of tire sales.