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Fiscal 2019 results: Achieved sales and profit growth; raised year-end dividend by ¥2

Masataka Yamaishi
President, Chairman of the Board

New record high for net profit

During the Company’s fiscal 2019 (Jan-Dec), the Japanese economy largely stagnated in the latter part of the year as the consumption tax hike and typhoons slowed consumption following the surge in demand prior to the tax hike and production activity remained sluggish. In the global economy, the US remained on a recovery track, but Europe and China continued to slow down. In this difficult operating environment, Yokohama Rubber achieved a slight year-on-year increase in sales revenue to ¥650.5 billion, while business profit fell 15.4% to ¥50.1 billion. However, operating profit increased 9.5%, to ¥58.6 billion, supported by the sale of fixed assets in the first quarter of the year, and profit attributable to owners of the parent expanded 17.8%, to ¥42.0 billion, with additional support coming from a third-quarter corporate tax-rate reduction in India that diminished the tax liability incurred during the restructuring of the Alliance Tire Group (ATG). As a result, we posted all-time highs in sales revenue and net profit. Reflecting this performance, we raised the year-end dividend by ¥2 per share, bringing the annual dividend to ¥64 per share. Our full-year projections for fiscal 2020 are sales revenue of ¥660 billion (+1.5% YoY), business profit of ¥55.0 billion (+9.7%), operating profit of ¥54.5 billion (-6.9%) and profit attributable to owners of the parent of ¥38.0 billion (-9.5%).

Completed the second year of GD2020 medium-term management plan

We have now completed two years of our three-year medium-term management plan, the Grand Design 2020 (GD2020), which was launched at the start of fiscal 2018. GD2020 is positioned as the framework through which we will fortify our business foundations by redefining our core strengths and deploying a growth strategy based on original approaches, which will enable us to make new strides forward in the 2020s. During fiscal 2019, we energetically implemented the growth strategies in each of our businesses to generate the momentum that will propel us into fiscal 2020. At the same time, we strengthened our management foundations in such areas as ESG and work-style reforms.

Our hobby tires won several international awards

The premium car tire strategy is one of the key growth strategies in our consumer tire business, and in fiscal 2019 we expanded sales of our high-inch, high-performance tires by winning several new contracts to supply original equipment (OE) for such premium car models as Porsche’s Cayenne and Toyota’s C-HR GR Sport. Under our winter tire strategy, we began selling BluEarth-4S AW21 tires in Japan, and in North America we introduced two new iceGUARD brand tires—one for passenger cars and the other for SUVs. In line with our hobby tire strategy, we aggressively introduced new products and expanded size lineups, especially for our core ADVAN and GEOLANDAR brands. Our hobby tires’ strong presence in the global market was highlighted by winning two prestigious international design awards and by our monopolization of the tire awards at the annual SEMA Show in the United States. Initiatives to strengthen communications with customers included increasing everyday communication through greater use of social networking sites and events, including various user-participation events. We are also making a greater effort to incorporate customer feedback into our product development.

Robust growth in OHT business

In our commercial tire business, subsidiary ATG’s off-highway tire (OHT) business, which includes tires for agricultural and forestry machinery, is enjoying robust growth driven by ATG’s unmatched cost-competitiveness and diverse product lineup. ATG’s Dahej Plant in India completed a 1.6x expansion of its production capacity on schedule at the end of 2019. ATG’s Alliance 398 MPT won a silver medal at the world’s largest agricultural machinery trade fair held in Germany, and the company’s all-steel radial Alliance 392 HD was used in a truck expedition project that succeeded in reaching the highest altitude ever attained by a motor vehicle. These successes are just a small part of the progress being made in achieving our commercial tire growth strategy that aims to foster the OHTs as a driver of growth. Meanwhile, as part of our efforts to expand our presence in truck and bus tires by building on our North American business platform, Yokohama Tire Manufacturing Mississippi (YTMM) has been steadily delivering OE tires since securing the IATF16949 certification in March 2019. We also strengthened our presence in the North American market for ultra-wide base single tires by launching the 114R tire. To meet growing demand for these tires, we are expanding capacity at our plant in Mie Prefecture, which will double its capacity in the first half of 2020.

The MB business, meanwhile, began shipments of the world’s largest pneumatic floating fender in June last year, as it continues to pursue its strategy to assert strong leadership.

ESG activities won high global recognition

We continue to fortify our management foundation through efforts to improve our financial condition, revitalize our corporate culture, and strengthen risk management. ESG activities have also become more important in recent years, and Yokohama Rubber has responded proactively by expanding our use of renewable energy, promoting the development of environmentally-friendly products, supporting rubber plantations and conducting labor surveys targeted at achieving the sustainable procurement of natural rubber, and appointing independent outside members of the board and an overseas member of the board. We also continue to promote work-style reforms focused on creating greater diversity in our employee base and providing support for better work-life balance. Our ESG activities have been recognized as meeting the highest global standards, as evidenced by our inclusion in the 2019 Climate Change A List compiled by CDP, a global environmental impact nonprofit organization, and in the global FTSE4Good Index Series for a 15th straight year.

In fiscal 2020, we will continue our efforts to achieve the goals of our GD2020 medium-term plan and to be 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.

March 2020