Achieved increases in sales revenue and business profit despite a difficult operating environment
Strong overseas sales of tires, including OHT
In the first half of fiscal 2022, the Japanese economy was affected by downward pressures on domestic business confidence but nonetheless began to see some signs of recovery supported by a rebounding global economy. Overseas, while we saw some signs of a weakening in the manufacturing sector in the United States, the situation in China began to emerge from a bottom as factories in many cities resumed operations. Meanwhile, the European economy remained on a moderate recovery track. In this environment, Yokohama Rubber’s fiscal 2022 first-half sales revenue increased 28.8% year on year to ¥391.5 billion, and business profit rose 5.3% to ¥27.7 billion. However, operating profit declined 44.6% to ¥26.9 billion, and profit attributable to owners of the parent decreased 36.9% to ¥23.3 billion. Despite difficult business conditions in the tire market, robust growth in overseas sales of tires, including off-highway tires for agricultural machinery and industrial machinery, and the weakening of the yen against other principal currencies fueled increases in our sales revenue and business profit. Based on the first-half results, we have revised the full-year earnings projections for 2022 that we announced in February. We now project sales revenue of ¥855.0 billion, business profit of ¥62.5 billion, operating profit of ¥60.5 billion, and profit attributable to owners of the parent of ¥42.0 billion. We distributed an interim dividend of ¥33 per share and plan to distribute an aggregate, full-year dividend of ¥66 per share, which would be a second consecutive increase in the annual dividend paid to our shareholders.
Expanding sales of high-value-added tires
We have been implementing our Yokohama Transformation 2023 (YX2023) three-year medium-term management plan since the start of fiscal 2021. During YX2023, our consumer tire business aims to expand the sales ratio of high value-added tires from 40% in 2019 to more than 50% by increasing sales of our ADVAN, GEOLANDAR, and WINTER tires. Toward that end, we have been making efforts to expand use of ADVAN and GEOLANDAR brand tires as original equipment (OE), strengthen sales in the replacement market, and expand size lineups, including for WINTER tires, and strengthen sales of tires suited to each local market’s needs. In the first half of 2022, our ADVAN tires were adopted as OE on two new battery electric vehicles (BEVs)—Toyota Motor Corporation’s bZ4X and Subaru Corporation’s SOLTERRA, and our GEOLANDAR tires are now coming factory equipped on the Lexus LX. Under this year’s YOKOHAMA “New Summer,” we are strengthening marketing to the replacement tire market, with a focus on two new ADVAN tires. We also increased sales of our AGW tires and tires of sizes 18-inch and larger above the levels recorded in the first half of 2021. In the second half, we will start up a new line at our Shinshiro Plant and expand output at our Mie Plant, as we aim to increase production capacity for 18-inch and larger tires to 41% of our total tire production capacity in fiscal 2023.
Acquisition of Trelleborg Wheel Systems and startup of YOHT new plant in India
Our commercial tire business is exploring opportunities created by market changes, with a focus on four themes—cost, service, digital transformation (DX), and strengthening its product lineup. To strengthen our OHT business, which is positioned as a future growth driver, in March this year we reached an agreement with Sweden’s Trelleborg AB to acquire Trelleborg Wheel Systems Holding AB (TWS), which has an enterprise value of EUR 2,040 million and an EBITDA multiple of approximately 9x. The acquisition is scheduled to be finalized in the latter half of 2022. After we announced the TWS acquisition, the Japan Credit Rating Agency reconfirmed its A+ rating on Yokohama Rubber corporate bonds based on its evaluation of our cash-flow generation capacity. This August, we launched production at a new OHT plant in Visakhapatnam, India, which was originally scheduled to begin operating in 2023. The new plant was built to expand the production capacity of Yokohama Off-Highway Tires (YOHT), a Yokohama Rubber Group company engaged in the manufacturing and sale of off-highway tires (OHT). By the end of 2022, the plant’s operations will boost our global OHT capacity by about 40% over the 2019 level. Our truck and bus (TBR) tire business is making improvements at its Mississippi Plant in the United States, where it expects to achieve an all-time high in TBR tire output in 2022. In Japan, we are investing to increase our Mie Plant’s capacity for TBR tires with small inner and outer diameters. We also are stepping up efforts to expand sales of recently introduced studless and all-season tires.
MB segment’s capacity expansion and structural reforms proceeding steadily
We are concentrating our MB segment’s resources in its two strongest businesses—hose & couplings and industrial products—as we seek to transform the segment into a generator of stable earnings. In the hose & couplings business, we are reorganizing our automotive hoses & couplings production network in North America. In the industrial products domain, we are endeavoring to expand our share of the conveyor belt market in Japan and succeeded in raising our domestic share to nearly 50% in the first half of 2022. As part of that effort, we are expanding capacity at our Hiratsuka Factory and plan to start production on the new line in October 2023. During the first half of 2022, we also completed the integration of our aerospace products business into our industrial products business in March.
Addressing the full range of ESG issues
Under our corporate slogan of “Caring for the future,” we are linking our business strategies to five key issues (materialities), including “The Earth”, “Products” and ”Community”, as we strive to realize our basic corporate philosophy “To enrich people’s lives and contribute to their greater happiness and well-being by devoting our wholehearted energies and advanced technology to the creation of beneficial products.” In terms of the key environment-related issues of carbon neutrality and a circular economy, we have set goals of achieving zero CO2 emissions and 100% use of sustainable materials by 2050. In addition, our efforts in support of proper use and protection of our oceans included an August donation to the Kanagawa Prefecture Sea Farming Association. Outside of the environment domain, we are actively addressing the full range of important ESG issues, including promoting coexistence with local communities, respect for human rights, diversity in our workforce, and stronger corporate governance. We believe these diverse efforts will lead to sustainable enhancement of Yokohama Rubber’s corporate value.
Establishment of the YOKOHAMA Digital Strategy
Under YX2023, Yokohama Rubber is promoting the use of digital technology, including artificial intelligence (AI) and sensor technology. To accelerate this digital transformation, we have established the “YOKOHAMA Digital Strategy.” This new digital strategy will further accelerate the initiatives begin carried out under YX2023’s core theme of “Exploitation x Exploration = Transformation.” Specifically, it will accelerate “Exploitation” initiatives targeted at strengthening competitiveness by improving processes and “Exploration” initiatives targeting the creation of new value and services for customers. The new digital strategy also will promote the reform of Yokohama Rubber’s corporate culture. Going forward, we will continue to make full use of digital technology to enhance our corporate value and generate sustainable transformation that will propel future growth.
Yokohama Rubber endeavors to achieve continued growth as a company trusted by customers around the world. We look forward to the continued understanding and support of our stakeholders.