Top Message

Making steady progress on GD2020’s growth strategies and strengthening of our business foundation

Masataka Yamaishi President and Representative Member of the BoardMasataka Yamaishi

Tadanobu Nagumo Chairman and Representative Member of the BoardTadanobu Nagumo

We would like to apologize for the concerns caused by the fire that broke out in May 2017 at Yokohama Tire Philippines, Inc. Since the second half of 2017 we have stepped up production at our tire plants in Japan and other countries to cover the reduction in production at our Philippines plant. Production capacity at the Philippines plant itself is scheduled to return to about half the pre-fire level by the end of 2018 and be completely restored by the end of 2020.

Record Sales Revenues and Operating Profit in First Half of 2018

In the first half of 2018, the Japanese economy remained on a gradual recovery trajectory. Outside Japan, the US economy sustained its recovery and the European and Chinese economies were relatively firm. However, the increasing risk of trade frictions caused by US trade policy are raising concerns for the global economy. Meanwhile, Japan’s tire industry faced a difficult operating environment, with demand for both original equipment and replacement tires below previous-year levels. In this environment, Yokohama Rubber achieved record first-half sales revenue and operating profit. Profit attributable to owners of parent increased 19.2% over the same period of the previous year, to 17.8 billion yen. Yokohama posted a 9.5% increase in business profit*, to 23.8 billion yen, and a 32.3% increase in operating profit, to 26.4 billion yen. Sales revenue increased 1.8%, to 309.7 billion yen. Yokohama abides by the full-year fiscal projections for 2018 that it announced in February. Those projections call for profit attributable to owners of parent to total 40 billion yen on operating profit of 600 billion yen, business profit of 63 billion yen, and sales revenue of 670 billion yen. We distributed to shareholders an interim dividend of 31 yen per share and plan to match that with another distribution of 31 yen per share at the end of the fiscal year.

*Business profit = sales – (cost of sales + selling, general and administrative expenses)

Start of New Medium-Term Management Plan, GD2020

This year marks the start of our new medium-term management plan, Grand Design 2020 (GD2020). The implementation of GD2020 will prepare us for the new strides forward that we expect to take in the decade of the 2020s. Accordingly, under GD2020, we will fortify our business foundation by redefining Yokohama strengths and deploying a growth strategy based on original approaches in each of our businesses. GD2020’s core financial targets for fiscal 2020 are sales of 700 billion yen, operating profit of 70 billion yen, and an operating profit margin of 10%. The plan’s main initiatives undertaken during the first half of 2018 are presented below.

Original equipment for premium cars and accelerated introduction of new tires

Our consumer tire business is implementing four strategies in line with its core theme of “Expanding our presence in the premium tire markets”. First is the premium-car tire strategy, which led to the selection of YOKOHAMA tires as original equipment for such premium cars as BMW’s M5 and Toyota’s new Crown during the first half of 2018. Under our winter-tire strategy, we introduced our all-season BluEarth-4S W21 for the European market and won rave reviews for our studless iceGUARD 6 at numerous test drive events. Under the hobby-tire strategy, we plan to follow up this summer’s North American launch of the GEOLANDAR X-MT, a mud-terrain tire for SUVs and pickup truck tires, by starting sales in Japan this autumn. In addition, we expanded the size lineup of our ADVAN A053, a radial tire for use in rally and dirt trial races. Another initiative in our consumer tire business is to increase communication with customers. Accordingly, we set up an account on the LINE@ communication app and launched our own website in an effort to expand the everyday channels of communication with customers and potential customers.

Strengthening OHT supply capabilities

We have positioned commercial tires as a pillar of growth in our second century and off-highway tires as a growth driver. Accordingly, our commercial tire business is expanding its OHT operations into a growth driver while also increasing sales of truck and bus tires in the North American market. We are strengthening Groupwide OHT supply capabilities, especially to meet the strong demand for tires used on construction machinery. We also plan to expand production capacity at the Alliance Tire Group’s plant in India by increasing its annual capacity 1.6-fold by the end of 2019. We also are strengthening our marketing of OHTs in Japan. In the truck and bus tire, we won certification from Volvo Trucks in the latter half of 2017 and are now supplying original equipment tires to three major truck makers in North America, the other two being Daimler and PACCAR. Responding to strong demand for our ultra-wide base single tires, we launched sales of a new size in North America and Japan and decided to double our production capacity for these tires.

MB operations focusing on businesses where we have demonstrated strengths

In keeping with the GD2020 plan’s “Allocate resources on a priority basis to business fields of strength” theme for our MB operations, we are focusing on automotive components and marine products. In the automotive components area, we have had two noteworthy recent successes—the development of hoses for car air conditioners that use the next-generation refrigerant and the development of a heat exchanger that raises the cooling efficiency of these air conditioners. Both these new products are being shipped to Fiat Chrysler. In the marine products area, we recently developed the world’s largest floating pneumatic fender, with a diameter of six meters. In addition, our Indonesian subsidiary has received international certification of its marine hoses and has begun suppling its hoses to ASEAN oil companies.

Various measures to strengthen our business foundation

We are also making solid progress toward strengthening our business foundation through measures in the areas of CSR, human resources, corporate governance, risk management, and financial strategies. For example, our CSR efforts have included adoption of the Sustainable Development Goals (SDGs) established by the UN in 2015, and new human resource policies include measures promoting a better work-life balance for our employees and greater diversity of our human resources. We also are strengthening corporate governance by expanding the introduction of internal whistleblower hotlines in our operations around the world and by increasing the number of external, nonexecutive members on our Board of Directors.

The Yokohama Rubber Group will continue the steady implementation of GD2020 strategies and initiatives as we strive to be an indispensable partner to customers around the world. We look forward to the continued understanding and support of our shareholders as we work toward achieving these goals.

August 2018