Japan’s third-biggest tyre maker, Yokohama Rubber Co. Ltd., is expecting a 12% increase in their operating profit for 2017 despite the rising prices of natural rubber and other raw materials. The world’s eighth-biggest tyre maker predicts operating profit will grow to 47.5 billion Yen (US$419.87 million) this year.
However, Gota Matsuo, general manager at Yokohama Rubber, said the higher prices of natural rubber and other raw materials will pull the company’s operating profit down by 24 billion Yen (US$212 million) in 2017.
Asia benchmark rubber futures on the Tokyo Commodity Exchange (TOCOM) hit their highest in more than five years late last month, boosted by Chinese speculators.
To minimise the impact, Yokohama plans to pass on the higher material costs to its customers by raising product prices and raising sales of tyres used in agricultural machines and industrial vehicles.
The company plans to increase tyre prices by up to 7% from April in the US market.
Asked whether it will also raise prices in Japan, Matsuo said: “We’ll carefully make decisions while observing how our competitors react.”
The 2017 profit guideline was in line with a consensus estimate of 47.54 billion Yen from five analysts polled by Thomson Reuters I/B/E/S.
The company assumes an average price of the near-month futures contract for Technically Specified Rubber No. 20 (TSR20) on the Singapore Commodity Exchange, a benchmark for rubber formed into blocks, at US$2.10 per kg, against US$1.38 a year earlier.
For 2016, Yokohama Rubber booked a 22% drop in operating profit, hurt by lower product prices and a higher yen against the US dollar.
Yokohama’s bigger peers Bridgestone Corp. last week forecast operating profit for 2017 will inch up 0.5%, while Sumitomo Rubber Industries Ltd. predicted a more than 30% fall in operating profit.