Yokohama sales and income down over a third, but outlook ‘unchanged’
The Yokohama Rubber Co., Ltd., has reported first quarter net sales of 127.7 billion yen a 5.6 per cent decline compared with the same period in the previous year. Operating income was worse, down 18.1 per cent, to 7.6 billion yen. Meanwhile net income was down 35.7 per cent to 5.6 billion yen. According to the company, the downturn in sales and earnings resulted chiefly from weakening sales of tyres in the Japanese original equipment market and in Yokohama's principal markets overseas.
In Yokohama’s tyre operations, sales declined 6.6 per cent, to 100.1 billion yen, and operating income declined 27.6 per cent, to 5.7 billion yen. Japanese demand for original equipment tyres declined following the expiration of government incentives for purchases of fuel-saving, low-emission vehicles and tyre demand was generally sluggish in North America, Europe, and China. Yokohama’s sales were basically unchanged in the Japanese market for replacement tyres. However, the company reported “vigorous” sales in winter tyres and launched new summer tyre products.
Yokohama projects that net sales in the six months to 30 June 2013, will increase 9.7 per cent over the same period of the previous fiscal year, to 295 billion yen; that operating income will increase 0.5 per cent, to 20.0 billion yen; and that net income will decline 5.1 per cent, to 13.0 billion yen. Therefore company has left unchanged its previously announced full-year projections for record sales and earnings. It projects that net sales will rise 12.6 per cent, to 630 billion yen; that operating income will rise 18.7 per cent, to 59 billion yen; and that net income will rise 0.4 per cent, to 36 billion yen. Underlying those projections are expectations of a strong recovery in overseas tyre sales in the latter half of the year.
Analysts support case behind recovery thesis, pricing strategy
While there were marked drops in sales and profitability at the centre of Yokohama’s financial figures, while tyre sales volumes fell by double-digit amounts in the period F12/13 and while the company’s share price reacted negatively in response the announcement, it wasn’t all bad. Financial analysts have pointed out that the bad news comes off the back of widely experienced factors and pointed to the hope for recovery in the second half of the year expected by many firms.
Analysts pointed the finger at Russia, Europe, and China when it came to explaining Yokohama’s falling demand and highlighted declining market share in the US as well. However delays in the switch to summer tyres from heavy snowfall in Russia and anti-Japanese sentiment in China are also likely to have played a part.To this end there has reportedly been some support for Yokohama’s apparent moves to adjust tyre prices and the company’s hopeful outlook for the rest of the year too.
“We look for the firm to regain lost ground in second quarter, but believe balancing product prices (margins) and sales volume (capacity utilization) is the challenge for tyre firms,” Morgan Stanley analysts wrote in an investor’s note dated 13 May 2013.