Tokyo - The Yokohama Rubber Co., Ltd., announced today a 53.7% decline in operating income from the same period of the previous year, to 5.6 billion yen, on a 1.3% increase in net sales, to 256.6 billion yen. Those results are for the six months ended September 30, 2008, the first half of the company's present fiscal year. Net income declined 95.7%, to 554 million yen.
Affected operating profitability adversely were the continuing upward trend in raw material prices, the appreciation of the yen, and increases in logistics costs and other selling expenses. Those adverse factors proved too large to offset fully through sales growth and cost-cutting measures. Aggravating the effect of the decline in operating profitability on net earnings was the partial relinquishment of a tax benefit associated with the write-down of unrealized gains on inventories.
Continuing sales growth in Yokohama's Tire Group offset a sales decline in the Multiple Business (diversified products) Group. Yokohama posted a 2.7% increase in sales of tires over the same period of the previous year, to 193.8 billion yen. Contributing to the growth in tires were increased sales to Japanese automakers; business gains in Russia, China, and the Middle East; and price increases. Operating income in the Tire Group declined 64.6%, to 3.2 billion yen, reflecting the upward trends in raw material prices, the appreciation of the yen, and growth in selling expenses.
Sales in the Multiple Business Group declined 2.7%, to 62.8 billion yen. That decline occurred despite growth in high-pressure hoses for off-the-road equipment. Sales were especially weak in aerospace products, largely because of a decline in government business. Sales also declined in golf equipment. Operating income in the Multiple Business Group declined 8.3%, to 2.7 billion yen. Aggravating the effect of the sales declines in aerospace products and golf equipment on operating profitability was the appreciation of the yen. The strengthening yen undercut profitability notably in marine hoses and marine fenders. Sales outside Japan account for an especially large proportion of Yokohama's business in those products.
The stronger-than-expected appreciation of the yen and the sudden worsening of the global economic outlook have prompted downward revisions in Yokohama's full-year fiscal projections. Management now projects that net income will decline 54.9%, to 9.5 billion yen, on a decline of 21.5% in operating income, to 26.0 billion yen, and an increase of 1.0% in net sales, to 557.0 billion yen. The new projection for net income is 26.9% lower than Yokohama projected in May, when it announced its business and financial results for the previous fiscal year. The projection for operating income is unchanged from the earlier projection, and the projection for net sales is 1.4% lower.