Sumitomo Rubber Industries, Ltd. Business Report FY2010

Business Highlights

Financial Overview

(in millions of JPY)
  FY2010 FY2009 Rate of Change (%) Factors
Overall
Sales 604,548 524,534 15.3

Sales and profit increased year-on-year because of the following factors:

- The Company reorganized its global business structure by consolidating its sales subsidiaries, while optimally allocating production. The company also increased sales of high value-added products, enhanced business in Europe and Central & South America, raised its supply capacity in China and Thailand, improved overall productivity, and reduced fixed expenses.
Operating income 47,571 28,738 65.5
Ordinary income 42,478 20,029 112.1
Net income 21,427 9,093 135.6
Tire business
Sales 513,801 433,472 18.5 Sales and profit at the tire business increased year-on-year because of the following factors:
- Vehicle production in Japan increased, being supported by eco-car incentive programs. Exports also improved thanks to economic growth in emerging markets as well as gradual recovery in European and the U.S. economies.
Operating income 39,412 22,518 75.0

Mid-term Business Plan

-The Company has developed a mid-term business plan through 2012 as an action plan to fulfill its long-term vision by 2015. It aims to achieve 700 billion yen sales and a profit ratio of over 8% by improving products, promoting restructuring and enhancing cost competitiveness. In its core business of automotive tires, it will reinforce development of environmentally friendly tires. It will accelerate commercialization of fuel-efficient tires and tires made from natural resources but petroleum, out of dependency on fossil fuels, in its plan to complete development of tires made 100% from natural resources except oil by 2013. (From an article in the Nikkan Jidosha Shimbun on February. 15, 2010)

Contracts

-The Company and Honda R&D Co., Ltd. jointly developed an eco-friendly tire named Dunlop ENASAVE 31. The tire company already started supplying the new tires for the Honda Fit Hybrid as standard equipment in October 2010. (From a press release on December 10, 2010)

-The Company started supplying Dunlop ENASAVE 2030 tires as standard equipment for the Mitsubishi i-MiEV. The tire sizes are 145/65R15 72S for the front, 175/55R15 77V for the rear. (From a press release, November 5, 2010)
 

R&D

R&D Expenditure

(in millions of JPY)
  FY2010 FY2009 FY2008
Tire Division 16,253 14,896 16,013
Overall 18,697 17,982 19,351
Ratio of R&D expenses at Tire Division 86.9% 82.8% 82.8%

R&D Structure

-The Company is carrying out joint research with the Goodyear Tire and Rubber Company based on its ties with the U.S. tire supplier. Engineers of both companies work in teams for respective projects to exchange their technologies.

R&D Facilities

Tire Proving Grounds Okayama Tire Proving Ground
Nayoro Tire Proving Ground
Asahikawa Tire Proving Ground
Golf Science Center

Product Development

- The Company released a new Dunlop eco-friendly tire. Use of special noise-absorbing sponge and low heat-generating adhesive rubber not only reduces noise but also leads to improved fuel economy and excellent braking performances. In addition, its new tread pattern is designed to optimize distribution of contact pressure, which offers enhanced produce lifecycle.

- The Company released a new standard tire under the Goodyear brand, which features low fuel consumption and long service life. The tire was graded as “low consumption tire”, becoming the first Japan-made Goodyear tire to meet the standard.

-The Company will strengthen its activities to increase sales of its eco-friendly tires, which contribute to cutting down fuel consumption. Based on the initiative, the company will shift to selling such tires under a single brand name, "Enasave", from marketing comparable products under several names. The "Enasave" is one of the brand names currently used in the company's fuel-saving tire lineup. It will promote use of the Enasave tires as OE tires, targeting the global market including Europe and the U.S. The company is currently developing tires made from petroleum oil-free, natural resources. It is also working on engineering tires that offer some 50 percent reduction in rolling resistance. By launching new technologies and expanding its sales channels, Sumitomo Rubber aims to lift its share in the market of fuel-saving tires, demand for which is growing further. (From an article in the Nikkan Jidosha Shimbun on February. 22, 2010)

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY2010 FY2009 FY2008
Tire Business 28,165 29,379 46,987
Overall 32,055 32,483 49,601
Ratio of capital investment at Tire Division 87.9% 90.4% 94.7%

-The Company invested mainly in its tire business by increasing production capacities as well as reducing the number of employees needed. Targeted facilities include car tire production facilities in the Company's Nagoya Plant, Shirakawa Plant, Izumiohtsu Plant and Miyazaki Plant.

Investments Outside Japan

-The Comapny announced it will construct a second plant in China for production of radial tires for passenger cars. The new plant will be built in Changsha, Hunan Province in inland China with an investment of 26.7 billion yen to meet surging demand for tires in China. The plant is scheduled to go into operation in July 2012 and will have capacity of producing 30,000 tires per day at the end of 2017. This will bring Sumitomo Rubber's tire production facilities to two in China. On this occasion, the tire maker will set up a holding company to consolidate management of manufacturing and sales operations in the market. A site of 550,000 square meters has been acquired in Changsha for the plant and its construction will begin in two phases in September. In the first phase, a plant capable of turning out 15,000 tires a day will be completed. The holding company will be established in 2011 with an investment of about 2.7 billion yen in Changshu, Jiangsu Province where Sumitomo has been producing tires since 2004. (From an article in the Nikkan Jidosha Shimbun on Jul. 30, 2010)

-The Comapny will increase the volume of passenger vehicle tires it supplies from its Thai plant to Japan. The project is intended to cover a drop in the company's domestic production capacity, following the discontinuance of passenger vehicle tires at its Isuzmi Ohtsu Plant in Osaka. Sumitomo Rubber's Japanese facilities are now shifting their focus to next generation tires such as low fuel consumption tires. By integrating production of conventional tires to its Thai plant, the company aims to optimize its demand-and-supply balance. (From an article in the Nikkan Jidosha Shimbun on September. 27, 2010)

-The Comapny is planning to raise production capacity at its Thai plant by 2 and half times the level in 2009 to nearly 70,000 by 2012. (From an article in the Nikkan Jidosha Shimbun on September. 17, 2010)

Major Capital Investment Projects (Automotive Segment)

(As of Dec. 31, 2010)

Company name
(Location)
Project Estimated amount
(million yen)
Project Period Increases in production capacity (%)
From To
Sumitomo Rubber Industries
Nagoya Plant
(Aichi Pref., Japan)
Production equipment for automotive tires 7,441 Jan. 2010 Dec. 2011 3
Sumitomo Rubber Industries
Shirakawa Plant
(Fukushima Pref., Japan)
Production equipment for automotive tires 6,262 Jan. 2010 Dec. 2011 1
Sumitomo Rubber Industries
Izumiotsu Plant
(Osaka Pref., Japan)
Production equipment for automotive tires 2,161 Jan. 2010 Dec. 2011 -
Sumitomo Rubber Industries
Miyazaki Plant
(Miyazaki Pref., Japan)
Production equipment for automotive tires 5,690 Jan. 2010 Dec. 2011 -
P.T. Sumi Rubber Indonesia Production equipment for automotive tires and golf balls 3,399 Jan. 2010 Dec. 2011 11
Sumitomo Rubber (Changshu) Co., Ltd.
(Jiangsu Prov., China)
Production equipment for automotive tires 3,202 Jan. 2010 Dec. 2011 12
Sumitomo Rubber (Hunan) Co., Ltd.
(Hunan Prov., China)
Production equipment for automotive tires 23,500 Sep. 2010 Dec. 2017 30,000 tires/day
Sumitomo Rubber (Thailand) Co., Ltd.
(Rayong, Thailand)
Production equipment for automotive tires 31,011 Jan. 2010 Dec. 2011 97