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Yokohama posts 90.4% operating profit loss in Q1

Liana Shaw by Liana Shaw
June 5, 2020
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The Yokohama Rubber Co., Ltd. posted a 90.4% decline in operating profit (1.2 billion yen, or about $11 million; down from 2019’s 12.878 billion yen, or about $120 million) in the first quarter of 2020.

The company also posted a 258 million yen (about $2.4 million) loss in Q1, compared with 9.1 billion yen (about $85 million) in profit in the same period of the previous year.

In Yokohama’s tyres segment, sales revenue and business profit declined. The company says the downturn in business profit reflected a decline in unit sales volume, an increase in production costs associated with reduced production volume and inventory-adjustment costs occasioned by a tyre recall in North America.

Yokohama’s sales revenue in OE business declined in Japan and overseas. That decline reflected production adjustments necessitated by a decline in Japanese demand associated with the coronavirus outbreak and by suspended operation at vehicle plants in overseas markets.

Sales revenue also declined in replacement tyres. The company says sales of winter tyres in Japan were weak on account of warmer-than-usual winter temperatures at the outset of the year, and Japanese business in replacement tyres also suffered from the adverse effect of the COVID-19 outbreak on consumer spending. Yokohama added business in replacement tyres was “generally sluggish in overseas markets, too.”

Sales revenue and business profit also declined in the MB (Multiple Business) segment, Yokohama said. The COVID-19 outbreak affected business severely in each product category. Sales revenue declined in high-pressure hoses as demand declined worldwide in the construction equipment sector and as automotive business slumped on account of suspended operations at vehicle plants in several nations, the company said. Yokohama also posted a decline in sales revenue in industrial materials as deteriorating market conditions undermined business in conveyor belts, civil engineering products, and marine products. Sales declined in Yokohama’s Hamatite-brand sealants and adhesives as COVID-19 occasioned the suspension of work in several urban redevelopment projects in Japan and as automotive demand shrank worldwide. Sales revenue declined, too, in aircraft fixtures and components, reflecting delays in public-sector business.

Yokohama also posted declines in sales revenue and business profit in the ATG segment. That segment comprises business in tyres for agricultural machinery, for industrial machinery, and for other off-highway applications. The sales and earnings declines reflected the COVID-19 impact on demand worldwide, Yokohama said.

The massive business disruption caused by COVID-19 will necessitate revisions in the full-year fiscal projections that Yokohama issued in February 2020, the company said. Yokohama will release its revised business projections and proposals for dividends as soon as management secures a firm grasp of the fiscal outlook, the company said.

Yokohama said several measures are underway at Yokohama to maintain a sound financial position. Those measures include fortifying short-term liquidity through optimal fundraising, paring cash expenditures by deferring capital spending and trimming costs, and reducing compensation for directors, officers, associate officers and managers.

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