KOBE, Japan — Sumitomo Rubber Industries Ltd.'s (SRI) operating profit for the quarter ended March 31 fell 54.1% to $25.3 million on 9.7% lower sales as the company dealt with the global economic impact of the COVID-19 pandemic.
Sumitomo in particular cited the "sharp downturn" and "challenging" outlook of the Japanese economy for its earnings drop. SRI has withdrawn and voided its 2020 results forecast from earlier and said it would reissue guidance at a later date.
Sales revenue fell to $1.75 billion on 11.4% lower unit sales volume of 26.5 million units, the company said. The firm's net result fell $31 million into the red, compared with net earnings of about $26 million.
The sharp economic downturn tied to the COVID-19 pandemic also fueled a continuing appreciation of the Japanese yen against the euro and emerging country currencies, SRI said, while acknowledging that the prices of natural rubber and petroleum-based raw materials fell and remained low.
Under these circumstances, SRI pursued various initiatives to reinforce its business foundations and improve profitability with the goal of accomplishing a revised Mid-Term Plan, which sets 2025 as the target fiscal year.
SRI's tire business suffered declines on par with the company overall, reporting a 51.6% drop in operating profits to $19.1 million on 10.2% lower sales of $1.25 billion, for an operating ratio of 1.3%.
Regionally, SRI reported double-digit revenue drops in Asia, Europe and "other markets, but reported 6.3% higher revenue in North America of nearly $345 million despite lower unit sales.
As for the pandemic's direct effect on production, the company said it suspended operations at factories in Japan for 10 days (in accordance with "Golden Week" vacation) and for four weeks in South Africa, Brazil, Turkey, the U.S., Indonesia, Thailand and China.