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Yokohama’s Profits and Sales Fall in First Three Quarters of 2016

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Yokohama Rubber Co. Ltd. reported net income of 8.5 billion yen on net sales of 410.2 billion yen for the first three quarters of the year ended Sept. 30, 2016. That compares to income of 18.3 billion yen on sales of 443.7 billion yen in the year-ago period.

Based on the exchange rate on Sept. 30, 2016, Yokohama recorded net income of $84 million on net sales of 4 billion for the first three quarters of the year. The company’s income-to-sales ratio was 2.1%.

The company attributed a 53.5% drop in profitability and 7.5% decline in sales versus the year-ago period to weakening demand and declining prices in its principal product sectors and the appreciation of the yen.

Operating income fell 38% to 18.9 billion yen.

The company’s financial results include Alliance Tire Group B.V., which Yokohama acquired in July 2016. Alliance Tire Group’s sales and earnings appear in a newly established segment.

Operating income in Yokohama’s tire segment declined 25.8%, to 16.6 billion yen, on an 11.0% decline in sales, to 310.5 billion yen.

 In the Japanese original equipment market, Yokohama’s sales declined amid a downturn in unit vehicle production and a downturn in tire prices, but the company achieved an increase in operating profitability on account of the continuing decline in raw material prices.

In the Japanese replacement market, Yokohama’s sales declined in unit volume and in yen value amid slackening demand, but the company says it achieved an increase in operating profitability by promoting high-value-added products successfully and by improving the composition of its sales portfolio.

 Sales and earnings outside Japan declined on account of the appreciation of the yen and escalating price competition despite an overall increase in unit sales volume. Contributing to the increase in unit sales volume were robust sales growth overall in North America, progress in developing new sales channels in Europe, and growth in shipments to automakers in China. The growth in China benefited from a reduction in taxes on small vehicles, which stimulated a recovery in vehicle sales.

Alliance Tire Group posted sales of 12.9 billion yen ($127 million) for the three months to September and an operating deficit of 2.8 billion yen. Yokohama said declining prices for grain undercut demand for agricultural equipment tires, Alliance Tire Group’s main product sector, and price competition escalated in that sector. Vigorous marketing succeeded, however, in achieving the target for sales at Alliance, according to Yokohama. The operating deficit reflected acquisition expenses and the amortization of goodwill.

Yokohama abides by the full-year fiscal projections announced in August 2016 for sales and earnings. The company projects profitability to decline 44.9%, to 20.0 billion yen, on a 30.3% decline in operating income, to 38.0 billion yen, and a 4.7% decline in net sales, to 600.0 billion yen.

The company projects the addition of Alliance Tire Group will add 27.0 billion yen in net sales and reduce operating income by 4.5 billion yen due to acquisition-related expenses.

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