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Yokohama’s Profits Drop Nearly 50% in the First Half of 2016

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Yokohama Rubber Co. Ltd. reported net income of 8.2 billion yen on net sales of 268.1 billion yen for the half year ended June 30, 2016. That compares to income of 16.2 billion yen on sales of 296.3 billion yen for first half 2015.

Based on the exchanged rate on June 30, 2016, Yokohama recorded net income of $79.8 million on net sales of $2.6 billion for the first half of the year. The company’s income-to-sales ratio was 3.0%.

The company attributed a 49.3% drop in profitability versus the year-ago period to a unit decline in Japanese vehicle production, weakening demand and declining prices in Yokohama’s principal product sectors, and the appreciation of the yen. These factors more than offset the continuing downturn in raw material prices.

Operating income in Yokohama’s tire segment declined 37.6%, to 12.1 billion yen, on a 10.1% decline in sales, to 208.2 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 said it achieved an increase in operating profitability by improving its composition of sales.

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

Sales 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 in North America, progress in developing new sales channels in Europe, and growth in shipments to automakers in China.

Yokohama has revised downward the full-year fiscal projections that it announced in February 2016 for sales and earnings. The company now projects that profit attributable to owners of parent will 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.

Yokohama acquired Alliance Tire Group B.V. in July 2016 and will begin including that company in its consolidated accounts in the third quarter (July to September) of 2016.

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 for the full year.

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