Yokohama's Profits Fall While Sales Increase in 2018's First Three Quarters
Yokohama Rubber Co. Ltd. posted net income of 16.3 billion yen on net sales of 460.8 billion yen for the first three quarters of the year ended Sept. 30, 2018. That compares to income of 21.8 billion yen on sales of 455.5 billion yen in the year-ago period.
Based on the Sept. 30, 2018, exchange rate, Yokohama recorded net income $143.0 million on sales of $4.0 billion. The company’s income-to-sales ratio was 3.6%.
The company’s earnings were down 25.5% versus the year-ago-period. The company says the decline reflects an 11.2 billion yen charge for asset impairment at Yokohama’s U.S. tire production subsidiary Yokohama Tire Manufacturing Mississippi LLC.
Net sales were up 1.2% year over year and were the highest ever for the first three quarters in the company’s history. Operating income was up 13.4% to a record 35.6 billion yen.
In Yokohama’s tires segment, sales revenue declined in original equipment business in Japan and overseas. That decline reflected the impact of product changeovers for multiple vehicle models equipped with Yokohama tires and a downturn in unit vehicle production in China.
Yokohama says sales grew in Japan’s replacement market through vigorous promotion of premium-grade tires under the global flagship brand, Advan; the fuel-saving tires of the BluEarth series; and other high-value-added products. Business in replacement tires outside Japan declined on account of adverse weather trends, currency instability in some emerging economies, and the negative effect on demand of concerns about U.S.-Chinese trade frictions.
In the ATG (Alliance Tire Group) segment, sales revenue increased on the strength of gains in original equipment business. Those gains reflected a recovery in demand for agricultural machinery, according to the company.
Yokohama has revised downward the full-year fiscal projections for sales and earnings that it announced on Feb. 19, 2018. The revisions reflect weaker-than-expected sales in the tires segment in China, Russia, and the Middle East; weaker-than-expected sales in its Multiple Business segment in construction sealants; and the charge for asset impairment at its U.S. tire manufacturing plant.
The company said that a charge for asset impairment at its US subsidiary Yokohama Tire Manufacturing Mississippi, LLC. Achieving profitability at its US Yokohama Tire Manufacturing Mississippi subsidiary has taken longer than anticipated when production began there. Te company says it has recorded asset impairment in accordance with a prudent reassessment of the business outlook for the subsidiary and of the outlook for recovering investment there. The asset impairment totals 11.2 billion yen and has resulted in a charge to other expenses in Yokohama’s third-quarter fiscal results.
Yokohama’s revised projections for sales and earnings call for net income of 36.0 billion yen, (down 9.9% from the previous year and down 10.0% from the earlier projection); for operating income of 61.5 billion yen (up 5.6% over the previous year and down 2.4% from the earlier projection); and net sales of 650.0 billion yen (up 0.6% over the previous year and down 3.0% from the earlier projection).