KOBE, Japan — Sumitomo Rubber Industries Ltd. (SRI) fell into the red on an operating and net basis for the six months ended June 30 on 20.8% lower sales, reflecting "extremely harsh" global economic conditions during the COVID-19 pandemic.
Sumitomo reported an operating loss of nearly $25 million on sales of $3.15 billion. The net loss was $86.5 million.
Overall, Sumitomo said an "extremely severe" business environment impacted by the pandemic caused the sales environment to deteriorate significantly. SRI noted in particular the Japanese economy faced "extremely harsh conditions" because economic activities were restricted and the employment situation deteriorated in addition to lower personal consumption, export and production.
At the same time the Japanese yen continued to appreciate against the Euro and emerging country currencies and the prices of natural rubber and petroleum-based raw materials fell and remained low.
Under these circumstances, the company said it pursued various initiatives to reinforce its business foundations and improve profitability with the goal of accomplishing the New Mid-Term Plan, which sets 2025 as the target fiscal year.
SRI's tire business unit also fell into the red during the period, reporting a business loss of $8.3 million on 20.8% lower revenue of $2.69 billion. The company reported lower replacement and OE market sales, both domestically and internationally.
In Japan, OE sales revenue fell because of a substantial decrease in vehicle production, although demand for high-performance products, particularly fuel-efficient tires, improved. Replacement market sales were down both due to the slow economy and lower winter tire sales.
In overseas markets, OE sales fell due to substantial drops in vehicle production in numerous regions, while replacement market sales revenue declined sharply in Asia/Oceania and demand was weak in the Europe/Africa region and the Americas.
North America fared better than other regions, with sales revenue down "just" 12.5% from 2019 at $617.5 million.
Looking ahead, SRI said it expects the sales decline for the second half to be around 10%, with China and North America leading the way when it comes to market recovery. The market for replacement tires is recovering faster than that for OE tires, SRI said.
The company noted the success of its Falken Wildpeak series of SUV tires in the U.S., aftermarket sales of which are 40% ahead of 2019 and versions of which have been selected for OE fitment of select Jeep and Toyota SUVs and 4x4s.