Hankook Tire, two other South Korean tyre firms hit by high rubber prices

August 9, 2017

hankookSouth Korea’s largest and the world’s seventh-largest tyre manufacturer, Hankook Tire Co., as well as two other local tyre makers took a hit in the second quarter of 2017 due to higher raw material prices and poor sales of Korean carmakers.

Hankook Tire said in a regulatory filing Tuesday that its consolidated operating profit in the second quarter was 203.7 billion won (US$179.5 million), down 34.4% on year and 12.3% on quarter. It delivered 1.67 trillion won in sales, down 3.5% on year but up 1.7% on quarter. Net profit fell 26.4% on year to 195.1 billion won while operating margin slipped to 12.2% from 18% a year earlier.

Higher rubber prices were mostly to blame for the severe drop in its earnings. Natural rubber prices were as high as US$2,099 per tonne in the first quarter, nearly double from the year-ago period, according to industry sources.

The price of butadiene, a synthetic rubber material, also rose threefold to US$3,005 per ton in the same period.

The sharp decline in car sales of Korean automakers that account for a lion’s share of local tyre makers’ sales, also affected the bottom line of tyre manufacturers. The domestic sales of Korea’s top five auto brands in the January-July period fell 2.5% on year to 91,296 units. The country’s two largest carmakers, Hyundai Motor Co. and Kia Motors Corp., also saw their sales plummet by nearly half in China and by over 20% in the US.

Hankook Tire’s smaller peers facing the same challenges are expected to report gloomy second-quarter earnings due to be released next week. Analysts forecast Kumho Tire Co. to post an operating profit of 300 million won in the second quarter, down a drastic 99.3% from a year earlier, while its sales are estimated at 733.4 billion won, down 1.5% on year.

Nexen Tire Corp.’s second-quarter earnings are projected to shrink 32.1% on year to 47.2 billion won and sales are expected to be 511.3 billion won, up 3.7% from the year-ago period.

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International Rubber Prices

Monthly The prices shown above do not include VAT @4% on purchase and expenses towards packing, transportation, warehousing  and other incidentals

Source: India Rubber Board


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