Sumitomo Rubber Industries, Ltd. Business Report FY ended Dec. 2012
Business Highlights
Financial Overview |
(in millions of JPY) |
FY ended Dec. 31, 2012 | FY ended Dec. 31, 2011 | Rate of Change (%) | Factors | |
Overall | ||||
Sales | 710,246 | 676,903 | 4.9 | 1) |
Operating income | 69,722 | 53,924 | 29.3 | |
Ordinary income | 67,351 | 49,927 | 34.9 | |
Net income | 35,451 | 28,386 | 24.9 | |
Tire business | ||||
Sales | 619,361 | 591,045 | 4.8 | 2) |
Operating income | 63,089 | 48,819 | 29.2 |
Factors
1) Overall
-Although vehicle production volume recovered after decreasing significantly in the aftermath of the Great East Japan Earthquake in 2011 and prices of natural rubber remained relatively stable, global demand was not so strong amid the slowing world economy.
-The Company improved profitability by increasing sales of high value-added products such as fuel-efficient tires, enhancing productivity, and slashing costs.
2) Tire business
-New tire sales in Japan gained from those in 2011 thanks to largely increased vehicle production and growing sales of fuel-efficient tires and other value-added products.
-New tire sales outside Japan also improved from those in 2011, because the Company increased its supply volume in response to growing vehicle production especially in emerging markets.
Management Strategy
-The Company released in September 2012 a new long-term strategy "VISION 2020" which calls for JPY 1.2 trillion (USD 15.4 billion) in sales and over 12 percent in operating profit margin in fiscal year ending Dec. 2020. In order to achieve the objectives stipulated in the long-term business plan, the Company is poised to fortify its production and sales structure in emerging markets, as well as advance technological innovations related to tires. It will also step up activities to increase sales of factory-installed new car tires to overseas automakers. The Company has been conducting operations along with the current long-term vision established in 2006, and is now on track to achieving the mid-term goal of JPY 700 billion (approximately USD 9 billion) in sales and 8.9 percent in operating profit margin during this fiscal year. The Company now assumes it will also be possible to achieve the final targets of JPY 800 billion (approximately USD 10.3 billion) in sales and over 10 percent in operating profit margin set for fiscal year 2015. (From an article in the Nikkan Jidosha Shimbun on Sep. 27, 2012)-"VISION 2020" Financial targets | (in billions of JPY) |
FY ending Dec. 31, 2015 (Revised) | FY ending Dec. 31, 2020 |
|
Overall Sales | 940 | 1,200 |
Tire business Sales | 780 | 1,000 |
Overall Operating Income | 100 over 10% |
150 over 12% |
Challenges
-To enhance the product lineup of fuel-efficient tires in Japan
-To expand sales of "Asia standard tires" designed specifically for the Asian market and to develop and release products that meet further stringent environmental standards in each country
-To develop petroleum-free tires made from natural resources
-To expand supply capacity in response to increasing tire sales in the global market. During 2013, the Company will start operations at its new plant in Brazil, while breaking ground for its new tire plant in Turkey.
Global Deployment
Taping into Turkish market-The Company, which is stepping up its global tire business, said it will tap into the Turkish market. The new facility will serve as the supply hub for tires not only in Europe, but also to Russia and the newly emerging markets of the Middle East and North Africa. Currently, the Company is also constructing a production base in Brazil, and the new Turkish operation will further complement its worldwide production structure. Production in Turkey will be conducted by a new joint-venture company to be created by Sumitomo Rubber and a local tire supplier, Abdulkadir Ozcan Otomotiv Lastik (AOO). The joint-venture will be formed in October 2012, planning operation launch in July 2015. Sumitomo Rubber is providing 80 percent, and AOO 20 percent of the planned amount of capital of USD 30 million (approximately JPY 2.4 billion), and investment in the project is likely to total about JPY 40 billion. Production capacity at the joint venture is expected to reach 30,000 tires a day by the end of 2019. The name of the new entity has not been decided yet. (From an article in the Nikkan Jidosha Shimbun on Sep. 25, 2012)
Increase of Overseas production ratio
-The Company said in August 2012 its intention to increase the ratio of the overseas production of its total output from approximately 52 percent at present to 60 percent by 2015. Against the backdrop of the fast growing automotive industry in emerging markets, the Company launched a full-scale production at its Hunan Plant, its second China facility, in July 2012. It is also increasing the manufacturing capacity at its Thai facility, which is likely to become one of the largest in scale in the industry. Through these expansion programs, the Company forecasts its overseas production rate of tires to climb from 36 percent in 2010 to 46 percent by the end of this year. The share is expected to rise further by 2013 when the new Brazilian facility commences production. (From an article in the Nikkan Jidosha Shimbun on August 11, 2012)
"Enasave" tire to the Global market
-The Company announced in January 2012 that it will introduce its environmentally friendly, Enasave tires to the global market, starting this month. It will initially release the Enasave EC503 tire in Thailand in January, China in March, and Indonesia in the second half of this year. The Enasave tires offer superior energy efficiency because of their low rolling resistance. The EC503 encompasses the advanced fuel-saving tire technology as well as high product durability vital to meet requirements in the Asian market. The Company is poised to market the Enasave tires worldwide, as demand for fuel efficient tires is expected to grow in line with the introduction of tire labeling systems in many countries. (From an article in the Nikkan Jidosha Shimbun on January 20, 2012)
Asian-standard tire
-The Company made it clear in January 2012 that it is developing a standard tire dedicated to the Asian market and launching the new tire in each market in Asia by the end of this year. The Company has so far served the Asian market by offering products with different specifications to meet needs in each country. It has, however, decided to change this policy and will standardize the tire specifications for the Asian region as a whole with the aim of reducing costs. In the midst of an ever increasing competition with low-priced tires from China and Korea, the Japanese tire maker is poised to offer a lower-priced, but durable standard tire in major markets in Asia. The Company is planning to produce its Asian standard tires in countries like China and Thailand to achieve sales of around 10 million tires a year. (From an article in the Nikkan Jidosha Shimbun on January 18, 2012)
Contracts
Brand | Product | OEM | OEM model | Start of Sale | Features |
Dunlop | Enasave EC300 | Honda | "N -ONE" | 2012 | Fuel-efficient tire |
Dunlop | SP SPORT MAXX A1 | Toyota | "Lexus LS" | 2012 | High performance tire |
Falken | SINCERA SN831A ECORUN | Volkswagen | "up!" | 2011 | Radial tire |
Dunlop | Enasave EC300 | Suzuki | "Wagon R" | 2012 | Fuel-efficient tire |
Dunlop | Enasave EC300 | Mitsubishi motors | "Mirage" | 2012 | Fuel-efficient tire |
Dunlop | SP SPORT MAXX TT | Nissan | "Cima" | 2012 | High performance tire |
Dunlop | Enasave EC300 | Toyota | "Corolla Axio", "Corolla Fielder" | 2012 | Fuel-efficient tire |
Dunlop | SP SPORT MAXX 050 | Toyota | "Lexus GS" | 2012 | High performance tire |
Goodyear | DuraGrip | Toyota | "Aqua (L grade)" | 2011 | Fuel-efficient summer tire |
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)
R&D
R&D Expenditure |
(in millions of JPY) |
FY ended Dec. 31, 2012 | FY ended Dec. 31, 2011 | FY ended Dec. 31, 2010 | |
Overall | 19,538 | 19,273 | 18,697 |
Tire Division | 17,033 | 16,771 | 16,253 |
R&D expenditures at the Tire Division as a % of overall R&D expenditures | 87.2 | 87.0 | 86.9 |
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.>>>Alliance with the Goodyear Tire and Rubber Company
R&D Facilities
-The Company completed construction of its Tire Technical Center (Kobe City, Hyogo Prefecture) in 2009, which functions as the Group's main facility for the development of tire technologies. Engineers at this technical center are developing environmentally friendly tires for the next generation.Tire Proving Grounds | Okayama pref. Tire Proving Ground Nayoro, Hokkaido pref. Tire Proving Ground Asahikawa, Hokkaido pref. Tire Proving Ground |
R&D Activities
-The Company announced in October 2012 that it has developed a new tire production technology designed to achieve ultra high accuracy. The new technique called the NEO-T01 features a metal former with an actual tire size, on which each material will be applied to make a roundness to improve riding comfort. The technology also contributes to reducing tire weight and preventing the tire deformation at a high-speed driving condition. The new technology will be initially introduced to Sumitomo Rubber's next-generation run flat tires for release in 2014. (From an article in the Nikkan Jidosha Shimbun on Oct. 6, 2012)Product Development
-Product development for FY2012Brand | Product | Features |
Dunlop | Premium Comfort Tire "VEURO VE303" | Quiet ride, excellent maneuverability, low rolling resistance, and superior wet traction |
Dunlop | Winter Tire "WINTER MAXX" | 11 percent improvement in braking performance on icy roads, longer service life |
Investment Activities
Capital Expenditure |
(in millions of JPY) |
FY ended Dec. 31, 2012 | FY ended Dec. 31, 2011 | FY ended Dec. 31, 2010 | |
Overall | 56,889 | 48,515 | 32,055 |
Tire Business | 53,940 | 45,777 | 28,165 |
Capital investment at the Tire Division as a % of overall capital expenditures | 94.8 | 94.4 | 87.9 |
-The Tire Division focused its investment activities on improving production facilities; streamlining manufacturing operations, including cutbacks in manpower; and enhancing productivity.
-Overseas, the Tire Division invested mainly in expanding its existing plant in Thailand and constructing new plants in China and Brazil.
-The Company is planning to invest JPY 56,959 million in plant and equipment in 2013.
Investments Outside Japan
-In December 2012, the Company announced that it will continue investing about JPY 60 billion in capital expenditures in 2013, maintaining a high level of investment for the two consecutive years, mainly for boosting tire production capacity at overseas market. The Company's investment in 2012 is estimated at about JPY 59 billion, and the Company has been enhancing its production units overseas. The investment in 2013 will involve building a new tire plant in Turkey for the European and Middle Eastern market, and will also be used for the Brazilian plant starting operations in the fall of 2013 as well as its Thai factory which is slated to be one of the world's largest tire production facilities. (From an article in the Nikkan Jidosha Shimbun on Dec. 21, 2012)-Sumitomo Rubber (Hunan) Co., Ltd., a second Chinese production subsidiary of the Company, held a ceremony on July 16, 2012 to mark the opening of a new plant in Changsha, Hunan Province. The plant will initially produce replacement radial tires for passenger cars. The investment in the new facility will amount to USD 300 million during the first phase until production capacity reaches 15,000 tires per day. Sumitomo Rubber (Hunan) is aiming to achieve 3 billion yuan in sales. The inauguration of the new plant will bring the total production capacity of the Sumitomo Rubber Group in China to 51,000 tires per day by the end of 2013. In addition to replacement radial tires for passenger cars, the new plant will begin to produce tires for SUVs and high-performance tires in 2013, and new car tires for automakers between the end of 2013 and early 2014. In the second phase, daily capacity at the new plant is planned to be 30,000 tires by the end of 2015, looking to further raise daily up to 60,000 tires if required. (From an article in the Nikkan Jidosha Shimbun on July 18, 2012)
-In February 2012, the Company announced that it held a ground-breaking ceremony for its first Latin American tire plant, Sumitomo Rubber do Brasil Ltda., in Fazenda Rio Grande, Parana, Brazil. The new plant of 500,000 square meters will manufacture and sell radial passenger tires. With an investment of approximately Real 560 million, about JPY 28 billion, for the first phase, production is expected to begin in October 2013. The new company will have production capacity of 15,000 tires per month at the end of 2016. (From a press release on February 8, 2012)
Major Capital Investment Projects (Automotive Segment) |
(As of Dec. 31, 2012) |
Company name (Location) |
Project | Estimated amount (in millions of JPY) |
Project Period | Increases in production capacity | |
From | To | ||||
Sumitomo Rubber Industries Nagoya Plant (Aichi Pref., Japan) |
Production equipment for automotive tires | 6,692 | Jan. 2012 | Dec. 2013 | - |
Sumitomo Rubber Industries Shirakawa Plant (Fukushima Pref., Japan) |
Production equipment for automotive tires | 9,474 | Jan. 2012 | Dec. 2013 | - |
Sumitomo Rubber Industries Izumiotsu Plant (Osaka Pref., Japan) |
Production equipment for automotive tires | 1,991 | Jan. 2012 | Dec. 2013 | - |
Sumitomo Rubber Industries Miyazaki Plant (Miyazaki Pref., Japan) |
Production equipment for automotive tires | 7,097 | Jan. 2012 | Dec. 2013 | - |
P.T. Sumi Rubber Indonesia (Jakarta, Indonesia) |
Production equipment for automotive tires and golf balls | 4,162 | Jan. 2012 | Dec. 2013 | - |
Sumitomo Rubber (Changshu) Co., Ltd. (Jiangsu Prov., China) |
Production equipment for automotive tires | 2,194 | Jan. 2012 | Dec. 2013 | - |
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 | 17,835 | Jan. 2012 | Jan. 2013 | Capacity increase by 39% |
Production equipment for Industrial vehicle tires | 9,900 | May. 2012 | Dec. 2017 | 50,000 tires/month |
|
SUMITOMO RUBBER DO BRASIL LTDA. (Parana, Brazil) |
Production equipment for automotive tires | 28,000 | Jul. 2011 | Dec. 2016 | 15,000 tires/day |
Sumitomo Rubber AKO Lastik Sanayi ve Ticaret A.S (Cankiri, Turkey) |
Production equipment for automotive tires | 40,000 | Oct. 2012 | Dec. 2019 | 30,000 tires/day |