Sumitomo Rubber Industries, Ltd. Business Report FY ended Dec. 2013

Business Highlights

Financial Overview

(in million of JPY)
  FY ended Dec. 31, 2013 FY ended Dec. 31, 2012 Rate of Change (%) Factors
Overall
Sales 780,608 710,246 9.9 1)
Operating income 77,055 69,722 10.5
Ordinary income 74,581 67,351 10.7
Net income 44,794 35,451 26.4
Tire business
Sales 681,099 619,361 10.0 2)
Operating income 69,850 63,089 10.7

Factors
1) Overall
-Prices of natural rubber remained low, while export sales improved on weaker yen. The Company, however, was faced with tightening competition especially in the aftermarket tire business outside Japan.

2) Tire business
-OEM sales in Japan fell from the previous year. Reasons for the drop included decreased vehicle production in Japan after the termination of eco-car incentive programs and automakers' move to shift production overseas.  
-Overseas OEM sales improved from the previous year, as vehicle production volumes increased especially in China and Indonesia.

Acquisitions

<South Africa>
-The Company announced that it has acquired Apollo Tyres South Africa (ATSA) from Apollo Tyres Limited, the former parent company of the corporation. The acquisition cost was USD 60 million (JPY 6 billion). The purchase includes ATSA's head office, the Ladysmith Plant, ATSA's sales network, and the production and distribution rights of Dunlop brand tires in 30 countries in Africa and two countries in the Indian Ocean area. Due to this transaction, Sumitomo will change the name of ATSA to Sumitomo Rubber South Africa (Pty) Limited. Sumitomo Rubber is poised to boost daily production capacity of passenger car and light truck tires at the Ladysmith Plant from the current level of 9,600 units to 12,000 units by 2016. (From an article in the Nikkan Jidosha Shimbun on December 10, 2013)

Contracts

-Major contracts in 2013:
Products Model
Grandtrek ST30 Toyota "Harrier"
SP Sport Maxx GT 600 DSST CTT Nissan "GT-R"
SP Sport Maxx GT 600 DSST CTT (NR1) Nissan "GT-R Nismo"
SP Sport Maxx TT Mazda "Axela"
SP Sport Maxx 050 Toyota "Crown"
SP Sport 2050 Toyota "Crown Majesta"
Falken Eurowinter HS449 Volkswagen "Polo"
Enasave 050 Honda "Accord Hybrid", "Accord Plug-in Hybrid"
Enasave EC300 Daihatsu "TanTo"
Nissan "DAYZ/DAYZ Highway Star"
Mitsubishi "eKWagon/eK Custom"
Suzuki "Alto Eco"
Nissan "Lafesta Highway Star"
Mazda "Premacy"
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

R&D

R&D Expenditure

(in million of JPY)
  FY ended Dec. 31, 2013 FY ended Dec. 31, 2012 FY ended Dec. 31, 2011
Overall 21,822 19,538 19,273
-Tire Division 18,976 17,033 16,771
R&D expenditures at the Tire Division as a % of overall R&D expenditures 87.0 87.2 87.0

R&D Structure

-The Company is carrying out joint research with the Goodyear Tire & 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 Pref. Japan) 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

Product Development

-Product development for FY2013
Brand Features Production Plan
High-performance biomass material
Petroleum-free natural material
2016
Super fuel-efficient tire offering 50% improvement in rolling resistance
The tire uses the Ultra Pure Natural Rubber (UPNR) and modified Solution polymerization Styrene-Butadiene Rubber (S-SBR) with optimum molecule structure on the nano-level.
Fall in 2014
Ultra Pure Natural Rubber (UPNR)
Highly purified form of natural rubber that improves both vehicle fuel-efficiency and the wear resistance of the tire by 10 percent
As a part of the fuel-efficient tires to launch in 2014
Enasave EC203 Rolling resistance reduced by 12%
Wearing resistance improved by 9 % on standard tires and by 17 % on mini- and compact-vehicle tires
2014

Investment Activities

Capital Expenditure

(in million of JPY)
  FY ended Dec. 31, 2013 FY ended Dec. 31, 2012 FY ended Dec. 31, 2011
Overall 57,270 56,889 48,515
-Tire Business 54,268 53,940 45,777
Capital investment at the Tire Division as a % of overall capital expenditures 94.8 94.8 94.4

-The Tire Division focused its investment activities on improving domestic production facilities; 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 Brazil.

-The Company is planning to invest JPY 63,249 million in plant and equipment in 2014. 

Investments Outside Japan

<Brazil>
-The Company announced that it has opened a new plant, Sumitomo Rubber do Brasil Ltda. (SRB), to produce radial tires for automobiles in Brazil. Approximately BRL 750 million (JPY 35.3 billion) were invested in the new plant. With a land area of approximately 500,000 square meters, SRB will have a production capacity of 15,000 tires per day by the end of 2015. (From a press release on October 4, 2013)

<Turkey>
-The Company announced that it has held a groundbreaking ceremony for its passenger car radial tire plant in Turkey. This is the first time that Sumitomo Rubber will construct a manufacturing facility in the country. The new plant, Sumitomo Rubber AKO Lastik Sanayi ve Ticaret A.S. (SAT), was established in February 2013 with a capital investment of approximately USD 30 million (JPY 2.9 billion), 80 percent of which was provided by Sumitomo Rubber and the remaining 20 percent of which was provided by Abdulkadir Ozcan Lastik Sanayi ve Ticaret A.S. Approximately USD 500 million (JPY 47.5 billion) will be invested in SAT, which will be constructed on 1 million square-meters of land. Production is scheduled to start in July 2015. Production capacity is expected to reach 30,000 tires per day by the end of 2019. (From a press release on September 10, 2013)

Major Capital Investment Projects (Automotive Segment)

(As of Dec. 31, 2013)
Company name
(Location)
Project Estimated amount
(in million of JPY)
Project Period Increases in production capacity
From To
Sumitomo Rubber Industries
Nagoya Plant
(Aichi Pref., Japan)
Production equipment for automotive tires 5,487 Jan. 2013 Dec. 2014 -
Sumitomo Rubber Industries
Shirakawa Plant
(Fukushima Pref., Japan)
Production equipment for automotive tires 8,802 Jan. 2013 Dec. 2014 -
Sumitomo Rubber Industries
Izumiotsu Plant
(Osaka Pref., Japan)
Production equipment for automotive tires 1,692 Jan. 2013 Dec. 2014 -
Sumitomo Rubber Industries
Miyazaki Plant
(Miyazaki Pref., Japan)
Production equipment for automotive tires 6,665 Jan. 2013 Dec. 2014 -
P.T. Sumi Rubber Indonesia
(Jakarta, Indonesia)
Production equipment for automotive tires and golf balls 5,451 Jan. 2013 Dec. 2014 -
Sumitomo Rubber (Changshu) Co., Ltd.
(Jiangsu Prov., China)
Production equipment for automotive tires 3,465 Jan. 2013 Dec. 2014 -
Sumitomo Rubber (Hunan) Co., Ltd.
(Hunan Prov., China)
Production equipment for automotive tires 23,500 Sep. 2010 Dec. 2017 30,000
tires/month
Sumitomo Rubber (Thailand) Co., Ltd.
(Rayong, Thailand)
Production equipment for automotive tires 10,670 Jan. 2013 Jan. 2014 Capacity increase by 14%
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
Sumitomo Rubber South Africa (Pty) Ltd.
(KwaZulu-Natal, South Africa)
Production equipment for automotive tires 11,300 Dec. 2013 Dec. 2016 12,000 tires/day