Sumitomo Rubber Industries Ltd.’s profit on its global tire business increased 416% in 2023. The company says profits for the year surpassed its own forecasts, thanks to three factors.
The three factors that contributed to those profit gains were: “decreased burden of ocean freight costs, decrease in raw material prices, and … efforts to maintain prices.”
Of the $550.5 million in total company profit recorded in 2023, $450.5 million came from the company’s tires business unit. Total company profit was up 253% year-over-year.
Sumitomo recorded total sales of $8.3 billion in 2023, up 7.2% from $7.7 billion in 2022.
The company said, “In the business environment surrounding the Group, there was a significant reduction in freight costs that soared in the same period of the previous fiscal year and a lull in the soaring raw material prices and energy costs, which considerably improved the profit as compared with the same period a year ago.
“Under these circumstances, the Group strongly promoted company-wide projects that aim to reinforce our business foundation with the goal of accomplishing the Mid-Term Plan,” which is due in 2027.
“At the same time, we worked to strengthen our competitive advantage through such efforts as developing and expanding sales of high-performance products that meet the needs of customers.”
Sumitomo says its domestic economy in Japan “partly remains at a standstill” though it has “shown a modest recovery.”
In 2023, the company says its global tire sales revenue exceeded 1 trillion yen ($7.1 billion) for the first time in the company’s history. Tire sales in North America totaled $1.6 billion, up 6.3% from 2022.
In the tire business in Japan, original equipment tire sales “significantly exceeded” 2022 levels as vehicle production constraints evaporated by the second half of 2023. The Japanese replacement tire market declined slightly from the previous year “due to sluggish shipments in the third quarter affected by price increases of winter tires from July, in addition to warm weather.”
In the U.S., Sumitomo says OE tire sales increased in 2023. But in the North American replacement tire market, the company’s unit volume fell short of 2022 levels “due in part to control of sales of low-profit products,” while the company’s WildPeak tires helped the Falken brand to exceed 2022 sales levels.
Elsewhere around the world, OE sales in Europe increased, while the OE sales in China and Indonesia both fell from 2022 levels. Replacement sales in the Asia and Oceania region remained low, though sales in China rebounded after 2022 sales were significantly affected by COVID-19.
Replacement tire sales also fell in Indonesia and Europe, while sales in South America were “on par” with 2022 sales, though imports in South America also increased due to the decrease in shipping costs.
Forecast
For 2024, Sumitomo notes that uncertainties and tensions remain— inflation, plus the wars in Ukraine and the Middle East. But the Japanese economy is expected to “show a modest recovery,” and raw material and energy costs are due to be more stable. Yet, the company notes, “our business will be subject to the impact of increased costs due to a surge in labor costs overseas.”
Sumitomo expects global sales to reach $8.5 billion in 2024, with tire sales accounting for $7.3 billion — a 2.6% increase over 2023 tire sales. Sumitomo is forecasting unit sales of 111 million tires in 2024, up from the 108.3 million tires sold in 2023.
The company forecasts another 3% gain in business profit for 2024, with a 4.6% profit gain in its tire business.
