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Yokohama Rubber forecasts higher 2017 op profit despite soaring rubber prices

Feb 20 Yokohama Rubber Co Ltd, Japan’s third-biggest tyre maker, on Monday forecast a 12 percent increase in 2017 operating profit despite soaring prices of natural rubber and other raw materials.

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.

The world’s eighth-biggest tyre maker predicts operating profit will grow by 12 percent in 2017 to 47.5 billion yen ($419.87 million).

Still, “higher prices of natural rubber and other raw materials will reduce our operating profit by 24 billion yen ($212 million) in 2017,” said Gota Matsuo, general manager at Yokohama Rubber, told a news conference.

To minimize the impact, the firm 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 percent from April in the U.S. 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 210 U.S. cents per kg, against 138 cents a year earlier.

For 2016, Yokohama Rubber booked a 22 percent drop in operating profit, hurt by lower product prices and a higher yen against the U.S. dollar.

Yokohama’s bigger peers Bridgestone Corp last week forecast operating profit for 2017 will inch up 0.5 percent while Sumitomo Rubber Industries Ltd predicted a more than 30 percent fall in operating profit.

($1 = 113.1500 yen) (Reporting by Yuka Obayashi; Editing by Christian Schmollinger)

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