Bridgestone Corp. posted net income of $285 million (32.8 billion yen) on consolidated net sales of $12.4 billion (1.4 trillion yen) for the six month period ending June 30, 2006.
Compared to the first half of 2005, net income was down 68%, while sales were up 13%. Net income in 2005 was impacted by a one-time extraordinary gain of $701 million (80.8 billion yen) related to certain non-recurring pension plan income items in Japan.
The company also reported operating income of $730 million (84.1 billion yen), a decrease of 9%. The company cites "the significant impact of rising costs for natural rubber, petroleum and other raw materials" as part of the reason for the decline.
At the parent company's Bridgestone Americas Holding Inc. (BSAH) subsidiary, first-half sales increased 9% over the previous year, to $5.3 billion. BSAH sales benefited from strength in its Latin American Operations and from BFS Diversified Products LLC.
BFS Retail & Commercial Operations LLC also exhibited sales growth in the first half of 2006, but posted a net loss of $43 million. Net income was significantly affected by increasing raw material costs and non-recurring charges taken in connection with the announced closures of tire plants in Oklahoma City, Okla., and Coquimbo, Chile. These factors were primary contributors to the company's net loss.
Bridgestone Firestone North American Tire LLC (BFNT), the company's North American tire manufacturing and wholesaling operation, experienced overall growth in unit sales of truck and bus tires and strength in the off-the-road tire segment during the period, offsetting an industry wide softness in the consumer replacement tire market.
BFNT reported a slight decrease in overall unit sales of passenger and light truck tires in the first half, due to the less-than- expected demand in the replacement market combined with a decline in original equipment shipments. The result was a flattening in domestic unit vehicle production. BFNT's agricultural tire group also experienced softness in its markets.
"Our business is facing unprecedented increases in raw material costs as well as increasing competition from low-cost producing countries," says John Vispo, BSAH vice president, finance and corporate controller. "While the efficiency and productivity enhancements implemented by each of our business units, as well as our price increases, have somewhat mitigated the substantial impact of rising raw material costs, our results reflect the fact that these increases have not been completely offset.
"In addition, the steps we have taken to close two high-cost tire plants will contribute to the long-term financial health of the company and our overall business, although the current-year impact adversely impacts our 2006 financial results. Since our goal -– and our responsibility -- is to ensure that Bridgestone Americas remains profitable into the future, we made the difficult decision to close the Oklahoma City and Coquimbo facilities and to incur one-time restructuring costs at this time."
Looking ahead, BSAH is forecasting net sales of $11.1 billion, an increase of approximately $1 billion over 2005, the second year in a row that the company has seen a sales increase of about $1 billion. In addition, BSAH is predicting that it will break even at the net income level.
Regarding its separate operating segments, BSAH expects full year 2006 sales results in all of its business units to exceed 2005 levels.
For the full year, Bridgestone Corp. is projecting sales of $25.59 billion (2.95 trillion yen), operating income of $1.43 billion (165 billion yen) and net income of $538 million (62 billion yen).
