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  5. Kumho Tire Co., Inc. Business Report FY ended Dec. 2014

Kumho Tire Co., Inc. Business Report FY ended Dec. 2014

Highlights

Financial Overview (Consolidated)

(in millions of won)
FY2014
(ended
Dec. 2013)		 FY2013
(ended
Dec. 2013)		 Rate of
Change (%)		 Remarks
Sales 3,437,868 3,698,541 (7.0) -
Operating income 358,398 345,935 3.6 -
Net income 131,608 100,958 30.4 -

Contracts

<BMW>
-The Company announced that it will supply its ECSTA HM KH31 tires for the BMW 3 Series that will be built at the German automaker's plants in Munich and Regensburg. The tire size will be 225/55R16. (From a press release on December 1, 2014)

Business Partnership

-The Yokohama Rubber Co., Ltd. announced that its Board of Directors resolved on February 14 to enter into a master technological alliance agreement with South Korea's Kumho Tire Co., Ltd. The master agreement defines the framework and purpose, and facilitates further discussions for the details of the alliance. The agreement is the result of discussions between the two companies following the signing of a Memorandum of Understanding in November 2013. Yokohama Rubber's president and representative director, Hikomitsu Noji, said that the two companies aim to increase their competitiveness in the global tire market by jointly conducting research and development on the tire-related technologies of the future, including environmental technology. (From an article in the Nikkan Jidosha Shimbun on February 15, 2014)

Awards

-The Company announced that it has received the Renault Group’s quality excellence award. Kumho is one of the 11 tire suppliers awarded by the automaker. Kumho supplies nine types of tires including the SM5, SM7, QM3, and Rogue to Renault. In addition, the company is the sole tire supplier for the Renault SM3 Z.E electric vehicle; it has been supplying its electric vehicle tires for this model since October 2013. (From a press release on October 6, 2014)

R&D

R&D Structure

Facility Location Overview
Central R&D Center Yong-in,
Gyeonggi-do,
Korea		 -Year established : 2013
-Main R&D center
Kumho Tire America Technical Center (K.A.T.C) Ohio
USA		 -Year established : 1990
-Developing tires for the North American OEM market and the aftermarket
Kumho Tire Europe Technical Center (K.E.T.C) Birmingham
U.K		 -Year established : 1997
-Developing high-performance tires for the European market
Kumho Tire China Technical Center (K.C.T.C) Tianjin
China		 -Year established : 2006
-Developing high-performance tires for the Chinese and European markets

R&D Expenditure (Consolidated)

(in millions of won)
FY2014 FY2013 FY2012
Amount 98,580 87,384 80,555
% of sales 2.9% 2.4% 2.0%

R&D Activities

-The Company has developed a low-noise tire. The company was able to reduce resonant noise significantly by applying porous polyurethane foam to the tire tread. Kumho became the first Korean company to develop such technology. The new tire offers an additional noise reduction effect of approximately 8 percent compared with Kumho's existing premium tires. (From a press release on October 13, 2014)

-The Company has developed a sealant tires (self-sealing tires), becoming the first Korean tire supplier to develop such tires. The sealant tire provides a seal around nails and other penetrating objects in the tread area to trap the air inside. The advanced tire enables the vehicle to continue driving, eliminating the need for emergency tire changes. (From a press release on January 3, 2014)

Investment Activities

Capital Expenditure

-During 2014, the Company invested a total of 259,851 million won in its three plants in Korea.

Investment outside Korea

<China>
-The Company announced that it will transfer and integrate the operations of its two plants in Nanjing, China to a new plant it will construct in the Nanjing Pukou Economic Development Zone. The company plans to invest USD 500 million in this project. The new plant, which will cover approximately 445, 000 square meters, is expected to be completed by June 2016. The relocation project is planned to be completed by the end of December 2016. The plant will produce tires for passenger vehicles, buses, and trucks. (From a press release on January 26, 2015)

<USA>
-The Company announced that it will resume the construction of a new tire plant in Macon, Georgia, U.S.A. The company plans to invest KRW 417,797 million in the new factory, which will be capable of producing 4 million tires per year. The plant is expected to be completed by the end of April 2016. The company initially broke ground for the new plant in 2008, but it had to put the project on hold due to financial difficulties at the Kumho Asiana Group. (From a press release on July 1, 2014)