Sumitomo Rubber Industries, Ltd. Business Report FY ended Dec. 2015
Financial Overview |
(in million of JPY) |
| FY ended Dec. 31, 2015 | FY ended Dec. 31, 2014 | Rate of Change (%) | Factors | |
| Overall | ||||
| Sales | 848,663 | 837,647 | 1.3 | -Sales increased, thanks to positive currency translation, which offset lower tire sales in emerging countries and lower than expected snow-tires sales in Japan due to a mild winter. |
| Operating income | 77,067 | 86,251 | (10.6) | - |
| Ordinary income | 78,894 | 87,968 | (10.3) | - |
| Net income | 55,834 | 53,206 | 4.9 | -In line with the dissolution of the commercial partnership with Japan Goodyear, the Company was able to achieve record high profits as a result of eliminating the tax burden related to the loss in valuation of the European joint-venture company, which it reported the past years. |
| Tire business | ||||
| Sales | 732,168 | 731,245 | 0.1 | -Tires sales in Japan: unit sales of fuel-efficient tires were higher y/y. However, snow-tire sales were lower y/y due to a mild winter. -New-car-tire sales in Japan: Unit production of vehicles was lower y/y. -Tire sales outside Japan: Sales in emerging countries were stagnant. However, they were higher in mainly the USA. Coupled with the low valuation of the yen, total sales were higher y/y. -New-car-tire sales outside Japan: sales were lower in Indonesia and China. However, they increased in Thailand, where the Company’s share of tires being factory-installed on new vehicles is high. The Company increased deliveries to non-Japanese OEMs in the USA. Coupled with the weak valuation of the yen, sales were higher y/y. |
| Operating income | 73,114 | 78,416 | (6.8) | - |
Dissolve the alliance with Goodyear
-The Company announced that it will merge its consolidated subsidiary, Dunlop Goodyear Tires Ltd. (DGT), effective January 1, 2016. Sumitomo Rubber, as a surviving company, will absorb DGT, which will be dissolved as a result of this merger. DGT sells new car tires in Japan. (From a press release on November 5, 2015)
-On October 1, 2015, the Company and The Goodyear Tire & Rubber Company of the U.S. dissolved the alliance agreement and joint ventures.
-The Company and The Goodyear Tire & Rubber Company of the U.S. executed an agreement to dissolve the alliance agreement and joint ventures on June 4, 2015. The Company will acquire the Dunlop trademark license of original-equipment tires for Japanese automakers in North America, and the exclusive usage of the Dunlop trademark for other 33 countries including Russia, Middle East and African countries. Goodyear will obtain the ownership of the Dunlop trademark license in Europe and for replacement tires in North America. The Company will purchase the tire plant in North America, and Goodyear will purchase the tire plant in Europe. Their joint ventures established for procurement and technology development will be dissolved. (From an article in the Nikkan Jidosha Shimbun on June 5, 2015)
A New Long-term Agreement with Goodyear
-The Company and The Goodyear Tire & Rubber Company of the U.S. have reportedly entered into a new long-term agreement regarding development and production of Goodyear-brand replacement tires in Japan. The two companies have just recently agreed on the dissolution of their alliance for global tire businesses. However, in the replacement tire market in Japan, The Goodyear Tire & Rubber will use Sumitomo Rubber's development and supply capacities to supply tires that will meet the needs of the Japanese customers. The Goodyear Tire & Rubber intends to strengthen its presence in Japan by ensuring stable supply of its replacement tires in Japan. (From an article in the Nikkan Jidosha Shimbun on June 9, 2015)
Production Capacity of Tires
-The Company’s tire production capacity in the fiscal year that ended in Dec. 2015 increased 11% y/y, with the production volume outside of Japan accounting for 56% of total production. This result is due to the launch of production at the Turkey Plant and the acquisition of the USA Plant.
Sales promotion of High-value added tires
-The Company will bolster sales of its high-value added tires. The Company will exhibit new promotional tools at its dealerships to better publicize the improved quietness and riding comfort of the "Le Mans 4" and "Veuro VE303" fuel-saving tires. Sales volume of new vehicles and the number of vehicle owners seem to have reached a ceiling in the Japanese automotive market. However, high-value added products are gaining prominence in automobiles as well as automotive parts and services. For example, imported premium cars priced at over JPY 10 million and mini vehicles priced at over JPY 1.5 million have sold well. (From an article in the Nikkan Jidosha Shimbun on March 19, 2015)
-The Company will gear up production of high value-added tires for SUVs and high-performance vehicles at its tire plant in Buffalo, New York, U.S. The Company will invest slightly less than JPY 10 billion to introduce new production facilities at the Buffalo plant and raise the plant’s capacity for producing high value-added tires to the level of its other plants. The Buffalo plant has a daily production capacity of 15,000 units, which the Company plans to maintain. After the alliance between the two companies is dissolved, Sumitomo Rubber will take over the Buffalo plant as its sole plant in North America. By strengthening the Buffalo plant, the Company will switch to production items that meet market needs in an effort to expand sales of its tires in North America. The Buffalo plant currently produces tires for passenger cars, trucks, and motorcycles. (From an article in the Nikkan Jidosha Shimbun on August 7, 2015)
-In Oct. 2015, the Company has held an opening ceremony for its new plant in Cankiri Province, Turkey. The new plant was jointly established with Abdulkadir Ozcan Otomotiv Lastik (AKO), a Turkey-based tire manufacturer. It is Sumitomo Rubber’s first manufacturing site in Europe and the Middle East and was added to the Company’s other six facilities outside Japan. Production of passenger car radial tires already started at the Turkish plant in June 2015. Sumitomo Rubber has invested USD 500 million (approximately JPY 59.5 billion) in the new facility, which is located on 1 million square-meters of land. Production capacity is expected to reach 4,000 tires per day by December 2015 and increase to 30,000 tires per day by the end of 2019. (From an article in the Nikkan Jidosha Shimbun on October 23, 2015)
Sales promotion of FALKEN brand tires
<Japan, China>
-The Company will start rebranding the Falken tire brand. So far, the Company has been promoting sales of Falken brand tires mainly in Europe where the Company has no license to sell the Dunlop brand tires. However, the Company will expand sales of Falken brand tires in other markets including Japan and China where the Company can also sell Dunlop tires, in order to beef up its product lineup and global sales. By 2020, the Company plans to double global sales of Falken tires to more than 40 million units from the 2014 level. It also intends to increase the sales ratio of Falken tires to its entire tire sales, from current 20% to 30%. (From an article in the Nikkan Jidosha Shimbun on July 6, 2015)
Contracts
-Major contracts in FY ended Dec. 2015
| Brand | Product name | Car model |
| Falken | ZIEX ZE914 ECORUN | FCA "Chrysler 200" |
| ZIEX ZE914 | Mazda "Demio 15MB" | |
| ZIEX ZE914A, ZIEX ZE914A ECORUN | Volkswagen "Passat" | |
| Dunlop | SP Sport MAXX 050 |
Toyota "Lexus RX", Subaru "Impreza Sport Hybrid" |
| Enasave EC300+ | Toyota "Prius" | |
| Daihatsu "Cast", "Move", "Wake" | ||
| Mazda "CX-3" | ||
| Suzuki "Alto Lapin" | ||
| Enasave EC300 | Suzuki "Alto" | |
| GRANDTREK PT3A, GRANDTREK PT2A, GRANDTREK AT23 for SUV | Toyota "Lexus LX" | |
| GRANDTREK PT2A, GRANDTREK AT23 for SUV | Toyota "Land Cruiser" | |
| GRANDTREK ST30 for SUV | Nissan "X-Trail Hybrid" |
Mid-term Management Plan (Jan. 2016 - Dec. 2020)
-The Company announced its mid-term management plan for the period from 2016 through 2020. The plan aims to expand business in Europe and the U.S. as a response to the dissolution of their alliance with The Goodyear Tire & Rubber Company. The Company will investigate the full-scale operation of its development bases in North America and Europe from 2017, with targets for a 60% increase in tire sales in North America and a 40% increase in Europe in 2020. This will be the first time that the Company opens development centers outside Japan. By increasing development activities, the Company aims to achieve sales of JPY 1.2 trillion and an operating profit of JPY 150 billion in 2020. These goals were detailed in the Company's "Vision 2020" long-term business plan, which was released in 2012 and covers the years until 2020. (From an article in the Nikkan Jidosha Shimbun on February 16, 2016)
Major Initiatives
| North America |
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| Europe |
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Long-term vision "VISION 2020"
-Under the new goals, "The Challenges of New Markets", "Insatiable Drive for Innovation", and "Entering New Business Fields", the Company aims to achieve the following financial targets.
| FY ended Dec. 31, 2015 (Result) |
FY ending Dec. 2020 (Target) |
|
| Sales (in billion JPY) | 848.7 | 1,200 |
| Operating Profit (in billion JPY) (Ratio) |
77.1 (9.1%) |
150 (12% and over) |
| ROE | 13.3% | 15% and over |
| ROA (Operating income base) | 8.1% | 14% and over |
| D/E Ratio (Debt Equity Ratio) | 0.6 times | 0.5 times and under |
Outlook for FY ending Mar. 31, 2016 |
(in million JPY) |
| FY ended Dec. 31, 2016 (Forecast) |
FY ended Dec. 31, 2015 (Result) |
Rate of Change (%) |
|
| Sales | 810,000 | 848,663 | (4.6) |
| Operating income | 70,000 | 77,067 | (9.2) |
| Ordinary income | 66,000 | 78,894 | (16.3) |
| Net income attributable to owners of the parent | 53,500 | 55,834 | (4.2) |
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)
R&D Expenditure |
(in million of JPY) |
| FY ended Dec. 31, 2015 | FY ended Dec. 31, 2014 | FY ended Dec. 31, 2013 | |
| Overall | 23,372 | 23,543 | 21,822 |
| -Tire Division | 19,865 | 20,543 | 18,976 |
| R&D expenditures at the Tire Division as a % of overall R&D expenditures | 85.0 | 87.3 | 87.0 |
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 Technical Center | Kobe City, Hyogo Pref. Japan |
| Tire Proving Grounds | Okayama Pref. Japan Nayoro, Hokkaido Pref. Japan Asahikawa, Hokkaido Pref. Japan |
-The Company announced that it has completed the construction of Building No. 5 of its technology and research center within the premises of the Company in Kobe Prefecture, Japan. Approximately JPY 1.3 billion (USD 10.4 million) was invested in constructing the new center, which has a floor area of approximately 3,700 square meters. (From a press release on August 4, 2015)
-The Company will increase its tire development and sales capabilities in Europe. The Company will establish its first European development office in Germany for the development of tires for local needs. It will also consolidate its three sales and technical service group companies in Germany, which are located in different areas of the country, to one location by January 2018. The Company will accelerate its business expansion in Europe where operational flexibility has been dramatically increased after the dissolution of its alliance with American The Goodyear Tire & Rubber Company. A new "European technical center" for tire development for European and African markets will be established in Hanau City, Hessen, and start operations in August 2017. The Company has been developing all of its tires in Japan, but it will create a new system to develop and evaluate tires that are directed toward local needs. At the European technical center, the Company will mainly design tread patterns that suit local road conditions. Development of basic technologies like new materials and structures will continue to be conducted in Japan. (From an article in the Nikkan Jidosha Shimbun on August 10, 2016)
Co-development
-The Company announced that it has launched a joint research project with Kultevat, Inc., a biotechnology company based in Missouri, USA, to accelerate the development of Taraxicum kok-saghya, also known as the Russian dandelion, as an alternative source of natural rubber to replace materials from Hevea rubber trees. Kultevat serves sustainable agricultural markets, primarily by the production of rubber and mixed sugar feedstocks for the biofuels market. Kultevat has vast experience in the commercial utilization of plant materials to develop profitable, sustainable, and environmentally benign sources of rubber. (From a press release on August 5, 2015)
New materials development technology
-The Company announced the development of the "Advanced 4D Nano Design", a new materials development technology to double the abrasion resistance of tires. At the 44th Tokyo Motor Show 2015, the Company is showcasing a concept car tire "Anti-Abrasion Tread rubber tire" featuring the new technology. The "Advanced 4D Nano Design" enables a more detailed simulation of rubber by the use of the "Kei" super computer. Taking advantage of the new technology, the Company aims to substantially improve its tire performances in all aspects such as grip, low fuel consumption and wear resistance, which are difficult to improve simultaneously. The Company further aims at introducing the "Next 4D Nano Design," its next-generation material development technology, in 2020 and afterward by using a successor to the "Kei".
* "4D Nano Design" technology, a new material simulation technology that significantly increases efficiency to develop high-performance tires. The simulation technology facilitates the research, prediction, development, and improvement processes at the nanometer scale.
Product Development
-At the 44th Tokyo Motor Show 2015, the Company is showcasing the "Gyroblade" airless tire technology and the "Coreseal" tire sealant technology that prevents air leakage when a tire tread is punctured. (From an article in the Nikkan Jidosha Shimbun on November 2, 2015)
"Gyroblade" airless tire technology
-"GYROBLADE" technology takes the form of a tire tread affixed to the circumference of a tire body that is composed of a metallic wheel surrounded by special resin spokes, producing a tire that fulfills all of the basic functions of a tire without requiring inflation. This advancement not only removes safety concerns arising from underinflated tires due to punctures or inattention while greatly reducing maintenance work, but also contributes to the environment by eliminating the need for spare tires.
"Coreseal" tire sealant technology
-The Company will commercialize puncture preventing "Sealant tires" that keep tires from leaking air with an adhesive material when a tire tread is punctured. Sealant tires will be produced at the Company's plant in Turkey, and supplied to European automakers. Sealant tires are able to maintain their internal air pressure and continue running even when the tire tread has been damaged by objects like nails, which eliminates the need for spare tires. They also offer low production cost benefits when compared to run-flat tires. The Company will add sealant tires to the lineup of tires that eliminate the need for spare tires, and meet various needs of automakers such as pricing and performance. (From an article in the Nikkan Jidosha Shimbun on May 27, 2016)
Biomass-derived rubber softener
-The Company announced that it will accelerate the development of its biomass-derived rubber softener and aims to start mass-producing it by 2016. Rubber softener ensures tire grip performance. The Company's new biomass-derived softener improved bonding to rubber and helps maintain grip performance for a long period. The Company is expecting that these biomass materials will be used to replace petroleum-based resources, while improving the performance of tires. (From an article in the Nikkan Jidosha Shimbun on November 16, 2015)
Capital Expenditure |
(in million of JPY) |
| FY ended Dec. 31, 2016 (Forecast) |
FY ended Dec. 31, 2015 (Actual Result) |
FY ended Dec. 31, 2014 (Actual Result) |
FY ended Dec. 31, 2013 (Actual Result) |
|
| Overall | 64,200 | 58,911 | 62,814 | 57,270 |
| -Tire Business | 59,700 | 55,862 | 58,638 | 54,268 |
| Capital investment at the Tire Division as a % of overall capital expenditures | 93.0 | 94.8 | 93.4 | 94.8 |
-In FY ended Dec. 2015, 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 enhancing production facilities in Thailand and South Africa, and in constructing new plant in Turkey.
-The Company is planning to invest JPY 64,200 million for overall, JPY 59,700 million for the Tire Business only, in plant and equipment in 2016.
Investments Outside Japan
-The Company announced that it will double its production capacity of passenger car and light truck tires at its U.S. plant from the current 5,000 units per day to 10,000 units per day by the end of 2019. USD 87 million (approximately JPY 9 billion) will be invested in this project. The company plans to increase local production of SUVs, which have strong demand in North America and is aiming to expand its sales in the region. The U.S. plant currently manufactures tires for passenger cars, light trucks, trucks, buses, and motorcycles. (From an article in the Nikkan Jidosha Shimbun on August 8, 2016)
-The Company will begin production of truck and bus tires at its factory in Brazil in March of 2019 with an initial capacity of 500 tires per day. The planned investment will total BRL 312 million (approximately JPY 10 billion). Currently, truck and bus tires sold in Brazil are imported from Japan. Producing the tires locally will ensure a steady supply of truck and bus tires for the Brazilian domestic market, and also avoid currency fluctuation risks. Moreover, from 2017 onward, the Company is also planning to invest a total of BRL 175 million (approximately JPY 5.6 billion) to increase production of passenger car and light trucks tires in Brazil. (From an article in the Nikkan Jidosha Shimbun on July 21, 2016)
-The Company announced on March 24 that it will start producing truck and bus tires at its tire plant in South Africa in July 2018. The investment in new production equipment will total ZAR 910 million (JPY 6.6 billion), with a daily production capacity of 750 tires planned. The new production facility in South Africa will be the Company's third for truck and bus tires outside Japan after those in China and the U.S. Demand for truck tires in African markets has been increasing in tandem with rapid economic growth throughout the continent. The start of local production will ensure a steady supply of truck tires for local markets, and the Company intends to further expand sales in Africa. In December 2013, the Company acquired the tire plant from Apollo Tyres South Africa. It has a daily production capacity of 10,000 tires as of the end of 2015. The Company is enhancing the plant's production capacity and plans to increase the daily capacity to 14,500 tires by the end of 2017. When the capacity for truck and bus tires is added, the daily production capacity will exceed 15,000 tires. (From an article in the Nikkan Jidosha Shimbun on March 25, 2016)