Korea’s top 3 tire makers hit hard by higher rubber costs

2017.08.09 15:02:21 | 2017.08.09 16:35:23

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South Korea’s leading tire maker Hankook Tire Co. took a hit in the second quarter due to higher raw material prices and poor sales of Korean carmakers. Its two other local peers are expected to be no better.

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

Higher rubber prices were mostly to blame for the severe drop in its earnings. Natural rubber prices were as high as $2,099 per ton 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 $3,005 per ton in the same period.

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The sharp decline in car sales of Korean automakers, which account for a lion’s share of local tire makers’ sales, also affected the bottom line of tire manufacturers. The domestic sales of Korea’s top five auto brands in the January-July period fell 2.5 percent 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 percent in the U.S.

Hankook Tire’s smaller peers facing the same challenges are expected to report gloomy second-quarter earnings, which are due for release 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 percent from a year earlier, while its sales are estimated at 733.4 billion won, down 1.5 percent on year.

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

Shares of Hankook Tire closed Wednesday down 0.32 percent at 62,800 won. Kumho Tire shares were up 0.14 percent at 7,140 won while Nexen Tire shares fell 0.37 percent at 13,300 won.

By Woo Je-yoon

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