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Hankook Operating Profit Fell 29% in 3Q

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Operating profit for Hankook Tire Co. Ltd. dropped 29% in the third quarter of 2017 compared to the same period a year ago, despite increases in sales in both North America and Europe.

Operating profit was 214.1 billion won, down from 302.6 billion won in 2016. Hankook recorded 1.824 trillion won in sales, up from 1.657.6 trillion won in sales a year ago.

The company didn’t provide insight into the lower operating profit, except to note raw material costs remain higher year-over-year, and the “impact from U.S. plant start-up costs resulted in lower-than-expected margins.”

Hankook attributed its increase in sales to these four factors:

  • stable sales of ultra-high performance tires in Europe;
  • an increase of winter tire sales in Europe; a jump in UHP tire sales in China;
  • the expansion of original equipment tire supply in China; and
  • sales in emerging markets, such as Indonesia.

In Korea, Hankook saw overall weak performance, “with repercussions from retail organizational change and OE partners’ strategic decision to diversity suppliers.”

Tire sales in Korea totaled 241 billion won, down from 274 billion won in 2016.

In China, the increase of OE business helped the company recover from the second quarter, when 201 billion won of tire sales were recorded; the figure in the third quarter was 236 billion won.

Europe was the largest of the company’s reported markets, with 637 billion won in tire sales, up from 529 billion won a year ago. Hankook says replacement tire sales grew “with strong winter sales and increased recognition of the Laufenn brand.” The company’s OE business was also stable.

In North America, sales totaled 498 billion won, up from 458 billion won a year ago. Despite weak market demand, Hankook said both OE and replacement sales grew.

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