Fiscal 2023 first-half net earnings up 18.8%

In the first half of 2023, the Japanese economy remained in a moderate recovery trend. Overseas, manufacturing activity in the United States continued to slow, but the automobile industry is emerging from its recent doldrums. In China, service consumption continued to recover, but demand for goods was weak, especially in the materials sector. In Europe, sluggish external demand and high inflation continued to weigh on the overall economy. In this global economic environment, Yokohama Rubber posted sales revenue of ¥443.2 billion, up 13.2% year on year, and business profit of ¥25.6 billion, down 7.8%. Operating profit was ¥28.2 billion, up 4.6%, and profit attributable to owners of the parent came to ¥27.7 billion, a year-on-year increase of 18.8%. In addition to our efforts to improve product mix, secure price increases, and expand sales, the increase in net profit reflects the sale of idle assets and a tire wholesale subsidiary in the United States. Our earnings forecast for fiscal 2023 is unchanged from our May announcement. We are targeting sales revenue of ¥1 trillion, business profit of ¥84.5 billion, operating profit of ¥87.0 billion, and net profit of ¥57.0 billion. We distributed an interim dividend of ¥34 per share, an increase of ¥1 yen over the previously announced figure, and plan to match that at year-end, for a full-year dividend of ¥68 per share, thus raising the annual dividend for a third straight year.

Steady progress in increasing the sales ratio of high value-added tires

Since fiscal 2021, we have been implementing our Yokohama Transformation 2023 (YX2023) three-year medium-term management plan. Under this plan, the consumer tire business is aiming to expand the sales ratio of high value-added tires from 40% in 2019 to more than 50% by increasing sales of its 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, expand size lineups, including for WINTER tires, and strengthen sales of tires best suited to local market needs. During the first half, we accelerated activities in all areas and achieved year-on-year growth in sales of our ADVAN, GEOLANDAR, and WINTER tires, including sales of tires with sizes of 18-inches and larger. In the second half, we will redouble our efforts to expand GEOLANDAR sales under our “Mud Match” themed sales campaign and maximize ADVAN sales during the brand’s 45th year. This autumn, we will launch new models of tires in these two high value-added brands in overseas market. We also will accelerate our investment to improve and expand our product mix. The additional investments will increase our Mie Plant’s capacity for large SUV size tires to about 1.4x the level in fiscal 2021 and our Shinshiro Plant’s capacity for 18-inch and larger tires about 1.5x its fiscal 2021 level. These efforts will bring us closer to achieving our goal of maximizing the sales ratio of high value-added tires.

OHT business entering a new growth stage

Our commercial tire business continues to explore opportunities created by market changes, with a focus on four themes—cost, service, digital transformation (DX), and strengthening its product lineup. Positioned as a future growth driver, our off-highway tire (OHT) business has been strengthened by the May acquisition of Trelleborg Wheel Systems Holding AB and the startup of Y-TWS. By our estimates based on fiscal 2022 sales, the addition of Y-TWS has elevated the Yokohama Rubber Group’s position in the overall OHT market to No.3 and gives us the No.1 share in the market for agricultural machinery tires and No.2 for industrial machinery tires. Our OHT business is now ready to enter a new growth stage. Meanwhile, our truck and bus tire (TBR) business continues to improve operations at its Mississippi plant in the United States. The plant’s output in fiscal 2023 is expected to reach an all-time high. In Japan, we are accelerating our response to the global shift to electric vehicles (EVs). In the second half, YOHT, part of our OHT business, will continue to prepare for the 2nd stage expansion of its Visakhapatnam Plant in India, with the new facilities expected to come on line by the end of fiscal 2024. The TBR business will step up its response to the EV market, including the development of new tires suited for EVs.

MB businesses reaping benefits of recent improvements

We are concentrating our MB segment’s resources in its two strongest businesses—hose & couplings and industrial products—as we transform the segment into a generator of stable earnings. Under the 100-Day Plan launched in the first half, we endeavored to improve profitability by speeding up decision-making and making necessary organizational reforms. As a result, the MB segment achieved both its sales revenue and business profit announced targets for the first time in several years. Aiming to achieve announced targets again in the second half, we will complete the realignment of our North America automotive hose & couplings production network, continue efforts to further expand our share of Japan’s conveyor belt market, and enter the market for solid fenders by first launching sales in Japan.

Steadily implementing sustainability-related activities

Under the concept of “Caring for the future,” we are conducting business activities aligned with sustainability initiatives that will help resolve social issues and lead to the continued increase of Yokohama Rubber’s corporate value. We continue to implement environment-related initiatives targeting carbon neutrality. In the first half of 2023, progress toward achieving carbon neutrality at production facilities included the startup of a new solar panel power generation facility and the installation of a renewable energy power source. Social-related issues included the continued implementation of work-style reforms and initiatives promoting human rights in the workplace. Initiatives planned for the second half include the development of EV tires; further progress toward carbon neutrality at our production sites; local community activities in Hiratsuka City, Kanagawa Prefecture, where we have moved our head office functions; and further unwinding of cross-shareholdings.

Enhancing corporate value to achieve a PBR of 1

We continue to implement initiatives aimed at enhancing our corporate value and raising our PBR to 1. As a basic policy, we seek to provide returns for shareholders through business growth, not share buybacks. During YX2023, we have concentrated strategic investments totaling about ¥390 billion in growth businesses, while keeping investment in existing operations within the scope of depreciation expenses. Also, we have generated ¥230 billion in cash flow from operations while generating additional funds of about ¥60 billion from the sale of idle assets and certain businesses. Going forward, we will proactively engage in dialogs with investors to deepen their understanding of Yokohama Rubber.

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.

August 2023