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Yokohama Improves First-Half Profitability by Nearly 40%

Posted on August 10, 2017

Yokohama Rubber Co. Ltd. reported net income of 11.4 billion yen on net sales of 310.8 billion yen for the half year ended June 30, 2017. That compares to income of 8.2 billion yen on sales of 268.1 billion yen for the first half of 2016.

Based on the exchange rate on June 30, 2017, Yokohama recorded net income of $101.7 million on net sales of $2.8 billion for the first half of the year. The company’s income-to-sales ratio was 3.7%.

Net income increased 38.7% over the year-ago period, and net sales were up 15.9%. Operating income was 18.4 billion yen, up 16.8% compared to the first half of 2016.

The company attributed the increase in sales and earnings to domestic and overseas sales gains in the tires segment, from sales gains in high-pressure hoses and in Hamatite-brand automotive sealants in Yokohama’s MB (Multiple Business) segment, and from the first-time inclusion of Alliance Tire Group B.V. in the company’s interim consolidated results.

Yokohama acquired Alliance Tire Group, which produces tires for agricultural and forestry machinery and for other off-highway applications, on July 1, 2016, and has incorporated that company’s operations in its consolidated accounts as the ATG segment.

Earnings benefited from the sales increases, from price increases for tires that Yokohama instituted in Japan in April and subsequently, and from the weakening of the yen.  These positive factors more than offset the adverse earnings effect of an upward trend in raw material prices, according to the company.

In Yokohama’s Tires segment, operating income increased 8.9%, to 13.1 billion yen, on a 6.4% increase in sales, to 221.5 billion yen.

The company’s tire business expanded strongly in the original equipment sector, led by continued growth in China and by growth in North America and in Russia.

Business in the replacement sector increased in unit volume and in value. Yokohama’s replacement business in Japan benefited from a surge in demand in advance of the price increases instituted in April and from sales gains for the company’s global flagship brand, Advan, and for Yokohama’s BluEarth line of fuel-saving tires. The company also posted replacement sales gains overseas, supported by recovering demand in Russia and reflecting strong sales in North America and in Europe.

In the ATG segment, operating income totaled 1.5 billion yen ($13.2 million) on sales of 30.3 billion yen ($270.1 million). Global weakness in grain prices weighed on demand for agricultural tires, according to Yokohama. The market exhibited signs of recovery, however, and sales in the ATG segment accorded with management’s expectations in the original equipment sector and in the replacement sector.

Outlook

Management has revised upward the projection that it announced in February 2017 for full-year operating income. Yokohama’s upward revision is account of stronger-than-anticipated operating profitability in the fiscal first half, continued weakness in the yen, and lower-than-expected raw material prices. The revised projection calls for operating income of 50.0 billion yen, a 5.3% increase over the earlier projection.

Management abides by the full-year projections for net income and net sales announced in February 2017. Those projections call net income of 30.0 billion yen and for net sales of 660.0 billion yen. Yokohama will adopt the International Financial Reporting Standards in fiscal 2017. Recalculating the full-year projections under those standards results in projections of 51.0 billion yen for operating income and 635.0 billion yen for net sales.

Related Topics: Yokohama financials

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