HYOGO, Japan — Toyo Tire Corp. reported a 31.8% drop in operating income for the quarter ended March 31 on 8.9% lower sales, declines the company tied to a "sharp downturn" in consumer spending related to the impact of COVID-19 pandemic restrictions.
Toyo's automotive parts business suffered more than the tire business, with sales dropping 14% versus 8.2%, the company's figures show.
Tire unit revenue fell to $663.9 million as tire production dropped 6.3% globally, although output in North America was up, 3.4% to 18,300 metric tons, Toyo reported. Tire unit operating income fell 29.8% to $67.9 million, Toyo reported.
Business in North America fell 9.5% to $382.8 million.
Commenting on the quarterly results and the COVID-19 pandemic, Toyo management said: "Toyo Tire Group is not immune to this state of affairs: we are experiencing a setback in demand as consumer spending showed a sharp downturn in our key sales territories and elsewhere, a curtailment of sales operations due to the restriction on outings and other activities in many countries, and the impact of production adjustments by auto manufacturers, to name but a few'"
Regarding the company's manufacturing base, Toyo said:
- Japan: Sendai plant closed for one week in April;
- U.S.: plants closed from April 1 to May 2. Production resumed May 3;
- China: plants closed in early February but production has since resumed;
- Malaysia: plants closed following the government's restrictions on business activities late March, but production has resumed at this point.
Toyo said it's taking steps to deal with the financial impact of the COVID-19 pandemic, including efforts to manage working capital in a "timely and appropriate manner" by adjusting inventory to a level that is proper for the times, for example, and is drafting a procurement plan based on a conservative financial plan (worst-case scenario: a 50% drop in net sales) to maintain financial health.
The company withdrew its earlier financial guidance for fiscal 2020, saying it is unable at this time to make "informed forecasts" of its business results due to uncertainties surrounding COVID-19.