Toyo Tire & Rubber Co. Ltd.'s almost two-year-old seismic isolation rubber issue continues to affect the company's profitability.
However, despite recording an extraordinary loss of $165.4 million for its fourth quarter ended Dec. 31, 2017, it still made a profit in fiscal 2017.
For the full year, Toyo posted net income of more than 15.4 billion yen on net sales of 405 billion yen. That compares to a loss of more than 12.2 billion yen on sales of 381.6 billion yen in fiscal 2016.
Based on the exchange rate on Dec. 31, 2017, the company recorded income of $137.3 million on sales of $3.6 billion for fiscal 2017.
Operating income was down 8.1% from 49.3 million yen to 45.3 million yen ($402.1 million).
Toyo's tire business unit posted increases in both operating income (1.4%, to 46 million yen) and net sales (7.6%, to 327.1 million yen) in fiscal 2017. The company's DiverTech business unit also increased its sales year-over-year, but suffered an operating loss of 851 million yen.
For the fourth quarter of 2017, the company posted an extraordinary loss of 18.6 billion yen, broken out as follows:
* product compensation response measure expenses of 4.9 billion yen, and
* a provision of reserve for product compensation of 13.7 billion yen.
"It became possible to calculate the progress of work (related to the seismic isolation products issue)," said Toyo. As a result, the company recorded 11.7 billion yen in cost for repairs and replacement of seismic isolation products; 1.2 billion yen in compensation, etc.; and 1.3 billion yen in miscellaneous charges (primarily, expenses related to equipment for replacing seismic rubber, in payroll for the seismic isolation rubber task force, etc.).
"Depending on the progress of how this is handled for the following fiscal year and beyond, if future costs arise -- mainly business compensation and repairs for damage such as delayed damage, expenses, etc., when repair work expenses are found to additionally exceed the reserve provisions -- additional provision of reserves for product warranties may be posted, but at the present time it is difficult to reasonably estimate the amount," said Toyo.
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