KOBE, Japan — Sumitomo Rubber Industries Ltd. (SRI) reported an operating loss in the quarter ended Sept. 30, the firm's second straight quarter with an operating loss.
Sumitomo cited Russia's invasion of Ukraine, Covid lockdowns, high costs and a general slowdown in economy as reasons for continuing pressure on margins.
The third-quarter operating loss of $19.6 million contributed to a 66.9% drop in operating income for the January-September period, to $76.6 million, SRI's financial figures show.
Sales revenue, in contrast, jumped 24.2% in the quarter to $1.95 billion and 18.9% in the nine-month period to $6.11 billion. As a result, the operating ratio dropped three points to 1.3%.
As a result of the performance thus far in 2022, Sumitomo revised downward its earnings forecast for the full fiscal year by nearly 60% to roughly $100 million, or about 1.2% of sales, in contrast with 5.6% in fiscal 2021. SRI also cut its sales forecast for the year by 4%, although full-year revenue will still be 17.5% greater than a year ago.
In addition, rising inflationary pressures over the first nine months led to "a persisting sense of economic stagnation," Sumitomo said, and the business continues to be affected by a decline in automotive production due to the shortage of semiconductors as well as the impact of soaring freight costs.
Prices of raw materials continued to rise during the period, while appearing to be "somewhat easing," SRI added.
SRI's tire segment also suffered an operating loss for the second quarter in a row, reporting a third-quarter operating loss of $31.2 million, which left the unit's business profit for the January-September period 85.4% below that of a year ago at $26.6 million.
Sales revenue, in contrast, jumped 26% in the quarter to $1.67 billion and 20% for the first three quarters of fiscal 2022 to $5.2 billion. Accordingly, the operating ratio slid to 0.5% from 4.2%.
In the Americas region, sales volume in North America declined, SRI said, but primarily as a result of cutting back on sales of lower-profit products, which in turn improved the product mix.
North American tire business unit sales revenue grew 26.5% for the nine-month period, SRI said, to $1.2 billion, putting North America on equal footing with SRI's domestic business in terms of revenue.
In South America, sales increased in response to "robust" local demand for replacement tires by leveraging the advantage of selling locally produced products.
In other overseas replacement market, sales in the Asia and Oceania regions exceeded the level of the same period of the previous fiscal year, thanks to a recovering trend seen with the eased impact of the COVID-19.
Domestically, SRI reported "sluggish" original equipment sales as vehicle makers in Japan continued to struggle with the global shortage of semiconductors, while replacement market sales grew on the strength of new premium summer tires, the growing acceptance of all-season tires and "solid" demand for winter tires.
The sports and industrial business units reported gains in both earnings and revenue during the nine-month period